Chicago Could Raise Tipped Restaurant Workers’s Wages

Chicago lawmakers are considering increasing the minimum wage restaurant and bar owners pay their tipped workers. Tipped workers earn $6.40 per hour, while non-tipped workers earn $13 per hour. The current system allows restaurant and bar owners to use tips toward filling that $6.60 per hour gap. If the law changes, tipped and non-tipped workers would earn the same base wages.

Major players, including the union-friendly Restaurant Opportunities Center and lobbyists from the Illinois Restaurant Association, will gather Tuesday at city hall for a hearing to debate the merits of tip credits. This will start a discussion that won’t be resolved for weeks if it ever makes it toward a vote.

The proposal would not eliminate tips. However, many restaurant owners worry that changing the system would be costly. They argue they can’t afford to pay workers more as operational costs, including real estate and taxes, rise. The law affects all tipped workers, not just those in the restaurant industry.

Members of the Restaurant Opportunities Center (ROC) favor changing the system. They argue tip credits make servers vulnerable to wage theft and harassment. Despite the racist, sexist, and classist histories of tips, ROC is not in favor of eliminating tips.

“We want $15 plus our tips,” Nataki Rhodes, of ROC’s Chicago office, said. “Better wages, better tips, tips on top.”

Campaigns feeding false information have spread throughout Chicago’s restaurant industry. Similar campaigns have popped up in places like Washington, D.C., where lawmakers also considered eliminating the tip credit. The backers of the D.C. campaign can be traced back to the president. D.C. lawmakers in October 2018 preserved the tip credit.

ROC Chicago is campaigning toward increasing the city’s minimum wage to $15 per hour. The minimum wage in Chicago is scheduled to rise in July 2020 in accordance with the rate of inflation. In February, Springfield lawmakers agreed to raise the state’s minimum wage to $15 per hour by 2025.

State lawmakers in California, Washington, Minnesota, Alaska, Oregon, Nevada, and Montana have already eliminated tip credits to mandate employers to pay their employees the same minimum base wage, regardless of tips.

The Illinois Restaurant Association’s Sam Toia wants Springfield lawmakers, not city council members, to regulate the tip credit. If Chicago lawmakers banish the tip credit, he said it would create an uneven playing field, making suburban restaurants more attractive to the workforce. If the change came at the state or federal levels, there would be uniformity, Toia said.

There’s already an uneven playing field as wages differ outside the city. Non-tipped suburban Cook County workers earn $5.25 per hour (regular minimum wage for suburban Cook County workers is $12 per hour).

Still, Toia said there will be more burden on restaurant owners. Diners should get ready to see more surcharges. Restaurants like Fat Rice, Daisies, and Giant all add a percentage on customers’s bills to pay for health care and other benefits. Toia is skeptical of such remedies and said these surcharges aren’t earmarked for wages. A restaurant owner isn’t obligated to set aside money from the surcharges for their employees, Toia said. Tips are legally mandate to go to workers, he added. However, it’s more complicated than that as federal law allows employers to pool and share tips.

Eliminating the credit would also spike operational costs, Toia said. The difference between $6.40 to the eventual $15 is 133 percent, a figure the restaurant association is touting.

“The current system works for employees, customers and restaurants,” Toia said. “They should keep it that way.”

Eliminating the tip credit has been the subject of debate for years, Toia said. The last time it was seriously discussed was during Governor Rod Blagojevich’s tenure when the governor raised the state minimum wage in 2007.