Major wage increase for tipped restaurant workers in Chicago

Significant Pay Hike for Tipped Hospitality Workers in Chicago

The Chicago City Council has endorsed the complete erasure of the subminimum wages for tipped personnel, making Chicago one of America's largest cities to implement such changes. Tipped employees in restaurants will now be remunerated at the city's existing $15.80 minimum wage, a significant increase for servers, bartenders, and other roles in the sector.

The One Fair Wage Ordinance

Introduced to the City Council over the summer, this revolutionary One Fair Wage ordinance is supported by Chicago Mayor Brandon Johnson, who played a key role in negotiating a compromise bill with the Illinois Restaurant Association. Notably, this legislation had more than two dozen co-sponsors.

Implementation will start with an 8% wage increase for tipped workers beginning July 1, 2024. Subsequently, the wages will continue to rise by 8% year over year until 2028 when tipped workers will finally achieve parity with the full minimum wage.

The Background of Subminimum Wage

Restaurant servers and other tipped employees at present receive a "subminimum wage", which serves as a base pay, supplemented by gratuities. The Fair Labor Standards Act (FLSA) sets the minimum base wage at a meager $2.13 per hour, although many states enforce a higher threshold. In some areas, employers are mandated to pay their tipped employees the full state minimum wage, before tips.

Public Reaction to the Change

Supporters of the groundbreaking law assert that the abolition of the subminimum wage will pave the way for a comfortable living wage for working-class employees. They highlight the need to address a history of racism and sexism in the restaurant industry. Advocates deem the enactment of the One Fair Wage Ordinance a significant win for a workforce predominantly comprising young women of color.

The Illinois Restaurant Association counters this by arguing that this new legislation could reduce profits by as much as fifty percent and even cut the income of tipped workers. According to their survey, many restaurant owners plan to raise menu prices, reduce staff, or consolidate positions, and trim employee hours to compensate for this increase in minimum-wage.

States abolishing Subminimum Wage

Chicago has now become the most populous city to phase out the subminimum wages independently for tipped workers. Currently, seven states have eradicated tip credit, where workers receive full minimum wage plus tips. These states include California, Washington, Oregon, Nevada, Montana, Alaska, and Minnesota. Last year saw Washington, DC residents passing Initiative 82, ending the subminimum wage for tipped staff by 2027.

Restaurant Industry at a Glance

Chicago is home to approximately 7,300 restaurants. Across the nation, that number inflates to nearly 750,000, providing employment to around 12.3 million workers. The U.S. further houses nearly 70,000 bars and nightclubs, all staffed with workers relying heavily on tips.