Chicago eliminates subminimum wage for tipped workers
Tipped workers in Chicago will be phased into the city’s $15.80 minimum wage. Proponents said higher wages will help staffing shortages, but opponents said it will lead to higher costs, fewer jobs and maybe backfire for tipped workers’ pay.
Chicago is phasing out the subminimum wage after a 36-10 vote by the City Council Oct 6. Tipped workers by 2028 will make the full Chicago minimum wage.
But one study found the policy will reduce tipped employment in restaurants. Those who keep their jobs will not earn enough to offset the lost wages of those who are either laid off or never hired to begin with. Raising tipped minimum wages was not effective in reducing low incomes, either, researchers found.
Some tipped workers are worried about exactly that as customers start tipping less and the waitstaff loses out.
Tipped workers had been making at least $9.48 an hour, 60% less than the $15.80 Chicago minimum wage, with tips making up the difference. When they don’t make up the difference, employers had to cover the gap.
Now the tipped minimum wage will grow by 8% each year on July 1, shrinking the gap employers must make up, until 2028. Restaurants have five years to prepare for the full elimination of the tipped minimum wage – if they are still open.
The Illinois Restaurant Association said the new ordinance will hurt the city’s 7,000 restaurants, employees and customers because of higher costs. Association President Sam Toia said even with the compromise of the five-year ramp, they “wholeheartedly disagree” with the ordinance that they believe will shutter some establishments. They argue the Illinois median for waitstaff at full-service restaurants is $28.48 per hour, thanks to tips.
The restaurant industry is the largest employer for Chicagoans age 16 to 24.