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Herman Cain's Distrust Of Minimum Wage Goes Back To Restaurant Days

First Posted: 10/27/2011 1:24 pm Updated: 12/27/2011 4:12 am

WASHINGTON -- Questioning America's minimum wage has somehow become a rite of passage in the Republican presidential primary.

Michele Bachmann has said she wouldn’t rule out lowering it. Ron Paul has predictably said it should be eliminated entirely. And Rick Perry, in his book "Fed Up!: Our Fight to Save America from Washington", has rued the role the commerce clause played in "creating national minimum-wage laws" and "establishing national labor laws."

But when it comes to battling our $7.25-an-hour wage floor, these contenders have neither the vision nor the resume of current frontrunner Herman Cain.

In his plan for economic "Opportunity Zones," Cain offers a slate of proposals aimed at revitalizing depressed pockets of the country, including zero capital gains and payroll taxes within qualifying areas. Although it doesn’t say so explicitly, the Cain campaign's primer on opportunity zones also suggests the possibility of rolling back minimum-wage laws in impoverished areas.

"Minimum wage laws prevent many unskilled and inexperienced workers (i.e. teens) from getting their first job and prices them out of the market," the plan says, listing a number of potential "solutions" to urban poverty.

Asked specifically about Cain's stance on the minimum wage, Rich Lowrie, Cain's senior economic adviser, referred HuffPost to a study produced by Laffer Associates, a firm specializing in supply-side investment research. The study, Lowrie wrote, showed that "when the minimum wage is set above the marginal productivity of a low skilled or inexperienced worker it hurts employment."

Minimum-wage protections are an issue Cain knows intimately. In his work as the CEO of Godfather's Pizza and later as president of the National Restaurant Association, Cain worked diligently in Washington and in the media to see that low-wage restaurant workers could legally be paid as little as possible, as In These Times has noted. In fact, Cain's time in the restaurant business was marked by a long and largely successful battle against minimum-wage increases, and even today, some 15 years later, many of the nation's waiters and waitresses have Cain and the restaurant lobby to thank for a federal minimum wage of $2.13 for tipped workers.

By 1995, when Cain was at the helm of Godfather's, the federal minimum wage had already lost much of its purchasing power since the 1960s and 70s, and it hadn't seen a bump in five years. When then-President Bill Clinton and Labor Secretary Robert Reich proposed raising it from $4.25 to $5.15, Cain emerged as one of the leading opponents of the pay boost.

In his testimony to a joint economic committee in Washington, Cain, like many of his Republican colleagues today, claimed that the modest raise would destroy thousands of jobs and eliminate entry-level positions that serve as the first rung on a ladder toward prosperity. Even though the economy was strong, he warned of dire job losses.

"A minimum wage increase is an ineffective way to raise someone out of poverty," Cain told lawmakers in February 1995. "By shooting wide and hoping to hit the right target, you're taking a gamble with harmful side effects."

Around the same time, Cain was advocating for the rollback of a child-labor law that prevented minors from working past 7 p.m. on Friday nights, as well as pushing for the implementation of a "starting wage" that would pay entry-level workers even less than the minimum wage, according to a 1996 profile in the Omaha World-Herald.

Cain was always careful to couch his dislike of the minimum wage in aspirational tones. Raised in poverty in the South, Cain was the first in his family to attend college, going on to oversee 450 Burger Kings around Philadelphia before jumping ship to resuscitate struggling Godfather's. Drawing on his own Algeresque past, Cain argued that a low minimum wage would allow for more entry-level positions, which in turn would give more workers a shot at someday becoming successful business owners. But then as now, many of the lowest-paying restaurants were operating with 100 percent turnover rates.

In his crusade against raising the minimum wage, Cain could be somewhat contradictory. He once said that most restaurants already paid higher than the minimum wage due to market forces -- but that raising it would destroy jobs. He also acknowledged that the minimum wage wasn’t enough to live on.

"The minimum wage has never been a living wage, so the government's notion of helping workers is not logical or realistic," Cain once told the Birmingham News. "The best way to create a living wage is to let the marketplace dictate it, not government. With unemployment rates so low, most businesses have to offer more to attract employees anyway."

Congress passed the minimum wage hike pushed by Clinton in 1996, the year Cain took over the National Restaurant Association. Alas, widespread economic calamity did not ensue. While the raise may have appeared to be a loss for businesses, it was largely a victory for Cain's restaurant industry, as the legislation included a significant carve-out for tipped workers.

For years, the federal minimum wage for tipped workers had been set as a percentage of the standard minimum wage, with tips theoretically making up the difference. But with the 1996 legislation, the two wages were decoupled, with the tipped rate set at a flat $2.13 for waiters, waitresses and others who work for gratuity.

Fifteen years later, the federal rate for tipped workers still has not budged, even as the base wage for all other industries has been raised several times. The low minimum may not mean much to a waiter being tipped at a high-end city bistro, but it could make a big difference to someone working at, say, a Waffle House in Kansas. For low-wage worker advocates, the 1996 carve-out is still viewed as a pivotal -- and deeply problematic -- moment in the 73-year history of the minimum wage.

"It seems like an obscure, technical issue," says Paul Sonn, legal co-director of the National Employment Law Project Action Fund, which advocates for a higher minimum wage. "But tipped workers across America would be getting more money if the rate had kept pace" with the standard minimum.

Although many states have raised their rates for tipped workers, some states still have not, leaving the federal rate to prevail. According to Sonn, some businesses outside the restaurant industry appear to deliberately put certain workers on tipped employment so that they can pay them less.

Cain did not rest once the 1996 law was enacted. He continued to bemoan the hike when talking to the press, pushing some disputed numbers from his association claiming that "more than 146,000 entry-level workers lost their jobs because of the actions of Congress."

His lobby was happy to get involved in minimum-wage issues on the local level as well. When the citizens of Tucson, Ariz., considered hiking the city's minimum wage to $7 in 1997, Cain was there to pour money into an effort defeat the referendum, according to the World-Herald profile.

Jeff Imig, then an activist who pushed unsuccessfully for the Tucson hike, recalls being steamrolled by the national and state restaurant groups. After HuffPost reached out to Imig, he dug up the campaign finance reports from the minimum-wage battle. He says that trade groups and businesses amassed nearly a quarter of a million dollars to fight the referendum, while his own group netted a measly $9,900 to push it.

"A lot of their money came from the National Restaurant Association, state organizations and restaurants," says Imig. "I remember mailings that went out that threatened Tucson would become an economic wasteland and every business in town would pack up and leave. It had no basis in history."

After the 1996 fight over the federal minimum wage, it was roughly a decade before the wage was raised again. Despite many hikes on the state level, Sonn says industry groups like the one Cain headed have generally prevailed in these fights, leading to minimum wages that haven’t kept pace with the cost of living. Rolling back the minimum wage in depressed areas, he says, would only further hurt local economies and drive more people into poverty.

"There is a real jobs crisis," he says. "But it's flowing from underinvestment in urban communities. This idea of the minimum wage being too high is baloney."

More on Herman Cain in the slideshow below:

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  • Positive Intensity

    A relative unknown upon his entry into the race, Herman Cain has experienced promising numbers in both name recognition, as well as the new metric of "positive intensity." These upward trends have since propelled him to the <a href="" target="_hplink">top of many GOP primary polls</a>. In late June, a <a href="" target="_hplink">Gallup poll</a> showed Cain's name recognition up 25 percent from earlier in the year, to 46 percent. Meanwhile, his positive intensity score stood at 24, among the highest of any candidate in the field. Enthusiastic supporters have also helped Cain take impressive wins at a variety of early straw poll events. He's taken the top spot at the <a href="" target="_hplink">Western Conservative Summit</a>, the <a href="" target="_hplink">Georgia GOP Straw Poll</a> in August (Georgia is Cain's home state), and more recently <a href="" target="_hplink">in Florida</a> and Chicago. Cain also won a <a href="" target="_hplink">February straw poll</a> at an Arizona Tea Party event, beating Ron Paul in a vote among attendees, though at the time he was the only officially declared 2012 candidate involved.

  • Pizza Mogul To Conservative Hero

    Cain's first trip to the political spotlight was launched by what is now called a "YouTube moment," though it took place more than a decade before the website was launched. It has since been re-transformed into a <a href="" target="_hplink">YouTube clip</a>. The highlight came in 1994 when Cain, then CEO of Godfather's Pizza, duked it out with Clinton at a town hall forum the president was holding to push his health care reform proposal. As Slate's Dave Weigel <a href="" target="_hplink">reports</a>: <blockquote>Cain got a question in. He'd been a turnaround artist at Pillsbury, working with Burger King, and in 1986 he'd been put in command of the failing Godfather's Pizza franchise. He saved it with triage, closing 250 of around 800 restaurants, before leading an investor group that bought the franchise and put him in charge. By the time he met Clinton, he had been elected president of the National Restaurant Association. This explained some of his confidence as he lit into his president. "On behalf of all of those business owners that are in a situation similar to mine," asked Cain, "my question is, quite simply, if I'm forced to do this what will I tell those people whose jobs I will have to eliminate?" "Well, wait a minute," said Clinton, attempting a charm offensive. "Let's ask--let's talk a minute about what you would have to do." The employer mandate would add only 2 percent to Cain's costs, Clinton argued, and Cain could just charge more for pizza. "I'm a satisfied customer, I'd keep buying from you." "Mr. President," said Cain, "with all due respect, your calculation on what the impact would do, quite honestly, is incorrect."</blockquote> It didn't take long for this clip to make the rounds, which won Cain commendations from Republican icons such as Newt Gingrich, Jack Kemp and Rush Limbaugh. For more on Cain's rapid political rise, read the rest of Weigel's piece at <a href="" target="_hplink">Slate</a>.

  • 9-9-9 Plan

    Cain has been making a big pitch for his "<a href="" target="_hplink">9-9-9</a>" plan, which would eliminate some taxes such as the payroll tax and estate tax, and lower a variety of others, leaving business taxes and income taxes at a flat rate of 9 percent. It would also create a national sales tax of 9 percent. The 999 plan has been <a href="" target="_hplink">criticized</a> as an economic blueprint that would put a bigger tax burden on the middle class. HuffPost's Amanda Terkel also <a href="" target="_hplink">reported</a> that the simple tax structure exhibited some similarities to the default given to players in the video game, SimCity 4. Cain added an important update to his plan in October, outlining tax exemptions for poorer Americans and economically depressed areas. The Associated Press reports: <blockquote>After sharp criticism over his one-size-fits-all plan from Republicans and Democrats alike, Cain proposed no income taxes for Americans living at or below the poverty line. He also proposed exemptions for businesses investing in "opportunity zones" as a way to give an economic jolt to rundown neighborhoods such as the one he visited in hard-hit Detroit.</blockquote>

  • What's His Deal With Islam?

    Herman Cain has repeatedly caused consternation with questionable comments about Islam and American Muslims. At a March event held in Iowa for prospective presidential candidates, Cain said outright that he <a href="" target="_hplink">wouldn't appoint any Muslims</a> to his cabinet if elected, over fears that they would work to install Sharia law. He later <a href="" target="_hplink">attempted</a> to walk that statement back, saying "I am not anti-Muslim. I am anti-terrorist." Months later, Cain stoked more scrutiny when he <a href="" target="_hplink">said</a> Americans "have the right" to block mosques in their communities. The claim came in response to a question by "Fox News Sunday" host Chris Wallace about Cain's criticism of a planned Islamic center in Murfreesboro, Tennessee, which had sparked protests from residents of the town. He later held a summit with Muslim leaders to try to patch up relations with the community. AP <a href="" target="_hplink">reported</a> at the time: <blockquote>Cain met with four Muslim leaders in Sterling, Va. He said in a statement later he was "truly sorry" for comments that may have "betrayed" his commitment to the Constitution and the religious freedom it guarantees.</blockquote>

  • Unpolished

    Cain's first display of political greenness came at an inopportune time, during his campaign announcement in May. Speaking to his followers about the importance of following the Constitution, Cain seemed to refer to the Declaration of Independence. "We don't need to rewrite the Constitution of the United States of America, we need to reread the Constitution and enforce the Constitution," Cain said. "And I know that there are some people that are not going to do that, so for the benefit of those that are not going to read it because they don't want us to go by the Constitution, there's a little section in there that talks about life, liberty and the pursuit of happiness." The Constitution, of course, doesn't reference "life, liberty and the pursuit of happiness." Weeks later, Cain made another <a href="" target="_hplink">public blunder</a> on Fox News Sunday, when he appeared to be confused on the concept of Palestinian "Right of Return," or the belief that Palestinians, as well as their descendants, who were forced to leave their property in Israel should be allowed to return. Israel is firmly opposed to the "Right of Return," and considering Cain had slammed President Obama earlier for his supposedly anti-Israel approach to Middle Eastern affairs, his apparent confusion on the issue didn't go unnoticed.

  • Cain: Benefactor

    Cain made a big impression in Omaha in the '80s when he helped spearhead an effort to save an inner-city youth center. It eventually culminated in a series of charity gospel concerts that raised more than $5 million for a new branch. HuffPost's Andrea Stone <a href="" target="_hplink">reports</a>: <blockquote>It was the late 1980s and the then-CEO of Godfather's Pizza and self-made multimillionaire brokered a deal with the YMCA of Greater Omaha to merge with the struggling Edmonson Youth Outreach Center so that its founder could get health insurance. Joe Edmonson was a beloved wrestling coach in the community who, despite being a quadriplegic, inspired a generation of underprivileged black youth. Cain had joined the board of the sports and after-school program in predominantly-black north Omaha after a young wrestler whose mother worked as a janitor at Godfather's headquarters approached him to help sponsor a team trip to a national tournament. So when the local YMCA approached Cain, one of Omaha's most prominent African American business leaders, for help to raise funds for a new neighborhood branch, he agreed. But only if the Y merged with the Edmonson Center.</blockquote> But the object of Cain's charitable affection may have changed of late, Stone notes: <blockquote>In recent years, Cain has written more checks to political causes and candidates than to charity. But the former businessman and conservative radio talk show host had chosen in years past to focus his philanthropy on education for inner-city youth so, he has said, they can overcome poverty and racial discrimination the way he did.</blockquote> Cain has also donated large sums to The University of Nebraska at Omaha, Morehouse College and Antioch Baptist Church. For more on the giving habits of other GOP presidential candidates, click <a href="" target="_hplink">here</a>.

  • Koch Candidate?

    Cain has sought to capitalize off of his supposed political outsider status, but a recent report suggested that the one-time pizza mogul may be deeply involved with some of the powerful, moneyed influencers in Washington politics --particularly the Koch brothers. From the <a href="" target="_hplink">Associated Press </a>: <blockquote>Cain's campaign manager and a number of aides have worked for Americans for Prosperity, or AFP, the advocacy group founded with support from billionaire brothers Charles and David Koch, which lobbies for lower taxes and less government regulation and spending. Cain credits a businessman who served on an AFP advisory board with helping devise his "9-9-9" plan to rewrite the nation's tax code. And his years of speaking at AFP events have given the businessman and radio host a network of loyal grassroots fans.</blockquote> Read the rest of the report here.

  • Sexual Harassment History?

    Politico <a href="" target="_hplink">reported</a> in late October that two women had filed sexual harassment complaints against Cain during his tenure as head of the National Restaurant Association in the 1990s. Cain has denied that the allegations had any merit, though his reaction to the resultant firestorm has been <a href="" target="_hplink">anything but consistent</a>. After first claiming ignorance, Cain later admitted to knowing more about the story than he had first let on. The video above documents Cain's vacillation on the facts of the report.

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