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Chicago Raises Minimum Wage to $15 Per Hour By 2021

The City Council also preserves the controversial tip credit

The hand of the waitress takes the tip. The waiter girl receives a tip from the client at the hotel bar. A bartender woman is happy to receive a tip at work. The concept of service
Chicago’s City Council increase the minimum wage.
Shutterstock

Chicago’s aldermen have compromised in the battle to raise the hourly salaries of tipped workers, a group that includes restaurant servers and bartenders. By 2021, the “sub-minimum” hourly wage will increase by $2, from $6.40 to $8.40 per hour. The City Council on Tuesday also approved raising Chicago’s $13 per hour minimum wage to $14 per hour in July 2020 and to $15 in July 2021.

The sub-minimum has been the source of much discussion over the last few months in Chicago’s hospitality industry. A coalition of labor-friendly groups approached Alderman (4th Ward) Sophia King earlier this year to encourage a proposal that would lift the $6.40 per hour wage to the standard minimum wage of $13 per hour. That didn’t happen on Tuesday, and thus the hotly debated “tip credit” has been preserved. Restaurant owners use servers’s tips to make up the difference between their base pay and the standard minimum wage. The practice saves restaurants money. Regardless of tips, all workers are legally assured of making at least the standard minimum wage.

Some restaurant owners worried about escalating workforce costs and claimed they couldn’t afford the increase and losing the credit. That was the stance taken by the Illinois Restaurant Association. Like in other cities faced with similar proposals, lobbyists launched campaigns against the proposal armed with websites and op-eds in news publications. There was misinformation that the proposal meant the city was eliminating tips altogether. Some servers also argued they would lose money, hypothesizing that customers would tip less if their base pay was increased. They said restaurants would raise prices and diners would be less inclined to tip.

Supporters of the increase argued workers deserve a higher base wage in addition to tips. Unions backed the increase, citing how depending on tips made employees vulnerable to economic conditions, as well as bad actors in the industry. They argued workers needed more pay thanks to the rising costs of living in Chicago. State lawmakers in California, Washington, Minnesota, Alaska, Oregon, Nevada, and Montana have raised what tipped servers get paid to match standard minimum wage.

King said she meant for the increase to happen gradually. Mayor Lori Lightfoot, in her first term, also wanted a gradual change. The Tribune reported that she felt the jump to $15 per hour might be too much for smaller restaurants. Fast-food chains are in better position to absorb the costs compared to a family-owned restaurant.

The plan approved Tuesday ensures the sub-minimum wage would rise at 60 percent of the standard minimum wage, which is the state’s threshold. The sub-minimum would also rise annually as the standard minimum wage increases with the rate of inflation. For comparison, the state minimum wage is scheduled to hit $15 per hour in 2025. The state’s minimum wage for tipped workers is $4.65 per hour. Meanwhile, Denver lawmakers on Monday approved a measure to increase its minimum wage to $15.87 by 2021.

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