The Battle Over Chicago’s Tipped Minimum Wage Is Over

Activists and the Illinois Restaurant Association have reached a compromise. The restaurant association has dropped its opposition to abolishing the tipped minimum wage in Chicago.

The tipped minimum wage ($9.48 per hour in Chicago) will be phased out over five years. Each year, the tipped minimum wage will increase by 8 percent until it matches Chicago’s standard hourly minimum wage of $15.80.

That buys restaurants that depend on the tip credit more time to adjust. That may include raising prices, adjusting menu options, or applying service fees.

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A revised ordinance should come up for a vote in October and would go into effect in July. It would also establish a $500,000 pool from private funds to help smaller restaurants transition. The measure also includes a carve-out for unionized restaurants to pay lower wages if they have contracts.

“They communicated, they listened,” says Illinois Restaurant Association President Sam Toia.

One Fair Wage founder Saru Jayaraman notes Chicago has a storied labor history as Jayaraman mentions the Pullman Porters, the freed slaves who unionized in 1935. Chicago is also the headquarters of the National Restaurant Association. If activists and the Illinois Restaurant Association can prove it can work in Chicago, it can work anywhere: “Chicago is the first really top-tier city to move in this direction in 50 years,” Jayaraman says. “In the next year and a half, you’re going to see massive policy change.”

Massachusetts could be next and that would cover Boston.

Jayaraman is optimistic about future progress on One Fair Wage. “Every one of the top-tier restaurant destinations in the country will have moved to One Fair Wage except New York City,” Jayaraman believes. “LA, San Francisco, Seattle, Las Vegas, Chicago, D.C., Boston — New York City will be the last one standing.”

Jayaraman is flying into Chicago to testify at Wednesday’s workforce committee hearing at city hall.

So how did it get here?

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The pandemic was the catalyst, the seismic event leading workers to go public with their grievances, Jayaraman says. In Chicago, it helped that Brandon Johnson defeated Paul Vallas giving the city a progressive leader and elevating allies to prominent positions. For example, 35th Ward Ald. Carlos Ramirez-Rosa is the mayor’s floor leader. The alderperson co-sponsored the ordinance with 26th Ward Ald. Jessie Fuentes. They immediately had the votes, at 26, for approval: “I can count votes,” Toia says. “And they had the votes.”

Activists could have turned their backs on the restaurant association and passed the ordinance, Toia says. Ramirez-Rosa acknowledged his side had the advantage and could have pushed for a two-year phase-in. But he told Crain’s, “Just because you can doesn’t mean you should.”

There were a few association members who told to Eater Chicago they didn’t mind the ordinance. They were already paying their tipped workers more than standard minimum wage. They also wondered about the restaurant association’s priorities and how much it cost to oppose One Fair Wage. One member says they were told the association spent more than $200,000 fighting the ordinance. Last week, the association pushed for an alternative ordinance introduced on Thursday, September 14. Johnson’s side didn’t appreciate that move and temporarily suspended communication with Toia.

During a Saturday emergency meeting, the association accepted reality: They could continue to burn money, but the effort appeared to be futile. Instead of opposing the ordinance, the members told Toia to “take the five years if they get five.”

The Future

Photo by Roy Rochlin/Getty Images for One Fair Wage

Eight states and D.C. have nixed the tipped minimum wage. Minnesota was the first state in the Midwest to do so. But Chicago is a major feather in One Fair Wage’s cap, one that will grab national headlines and the attention of Illinois legislators. Is it time to schedule a meeting with Gov. J.B. Pritzker?: “It absolutely is,” Jayaraman says. “It absolutely is.”

In the interim, Cook County could take action. Toia says he wouldn’t be surprised if county board President Toni Preckwinckle and company follow suit to even the playing field with nearby suburbs like Arlington Heights and Oak Lawn. Evanston scheduled an October 5 meeting with the hope Chicago does the heavy lifting and takes a vote at its October 4 meeting.

Crain’s reports not everyone is happy. The same alderperson who wants to restrict late-night bars, 2nd Ward’s Brian Hopkins, says he’s voting against the ordinance. Toia says he hasn’t had time to dig into Hopkins’s proposals but acknowledges his membership will likely be passionate about the matter. Restaurant owner Brad Parker, who founded the Hampton Social chain of bars, says restaurant owners are starting to ignore Chicago and places without the tipped minimum wage. Parker’s comments come as he prepared to open a new Mexican restaurant, Costera, in Fulton Market.

Photo by Jeff Schear/Getty Images for The James Beard Foundation

Activists say they aren’t taking tipping away. However, in data from 2021 through the third quarter of 2023 from Toast, California (one of the states that eliminated the tipped credit), ranked dead last in the country, when it came to tips at full-service restaurants. They left an average tip of 17.9 percent. Illinois ranked No. 30 with an average tip of 19.6 percent. Nearby, Indiana ranked No. 2 at 21 percent. These markets are different due to factors including fine dining restaurants and culinary tourism.

About one-third of Illinois Restaurant Association members are already paying tipped workers the standard minimum wage. That means prices have already increased, Jayaraman says, but consumers haven’t noticed. She wonders why the industry treats inflation as a standard business but throws a fit when discussing increasing wages, something that’s not keeping pace with the rate of inflation. She worries about how this specifically impacts BIPOC women: “Those workers are facing the exact same inflationary pressures in their home lives in the grocery stores that we’re all facing when we eat out,” Jayaraman says.