Chicago Starts Five-Year Phase-Out of Tipped Minimum Wage

Chicago’s ordinance raises wages for tipped workers annually until 2028.

Tipped hospitality workers across Chicago are getting a raise on Monday, July 1 as a hotly debated city ordinance goes into effect, increasing the tipped minimum wage from $9.48 per hour to $11.02.

The result of a historic vote by Chicago’s City Council in October 2023, the ordinance will phase out the city’s tipped minimum wage — essentially, a subminimum wage augmented by tips — growing it by eight percent annually over five years. This will continue until it matches the standard wage, which is also increasing as of Monday from $15.80 per hour to $16.20 for businesses with four or more employees.

In addition, changes in paid time off have also gone into effect. Employees who work at least 80 hours through a 120-day duration are entitled to five days of paid leave and five days of paid sick leave. The 10 combined days were a compromise from the 15 that was proposed last year.

Chicago Mayor Brandon Johnson has called the efforts his team’s way of “making Chicago the most pro-worker city in the country.” They’re the culmination of work by activists like the progressive group One Fair Wage and officials including Johnson (who made it part of his platform), the wage increases were the subject of much divisive debate last year. In the early years of the pandemic, local hospitality workers began speaking out more loudly than ever about the challenges of relying on tips to get by. Opponents, however, including some members of the Illinois Restaurant Association, countered with fears that the increase in costs for operators would force them to raise prices and thus alienate customers, harming restaurant businesses in the long term.

Johnson’s 2023 mayoral victory was key, says national labor activist Saru Jayaraman, founder of One Fair Wage. By August, Jayaraman declared that the city’s ordinance was all but passed. But in September, opponents threw a Hail Mary by proposing a new association-backed ordinance that would increase Chicago’s tipped minimum wage to $20.54 per hour — the highest in the nation — in any restaurant that uses the tip credit.

Within days, however, the sides reached a compromise and the restaurant association dropped its opposition to a revised ordinance that established a $500,000 pool from private funds to help smaller restaurants transition and address the need for unionized restaurants to pay lower wages per worker contracts. This move cleared the way for activists and supporters to declare victory ahead of the city council vote.

Many across the U.S. are keeping a close eye on Chicago, waiting to see how the ordinance will impact the city’s hospitality industry. Seven states — Alaska, California, Minnesota, Montana, Oregon, and Washington — had long dispensed with a tip credit, and in May 2023, Washington D.C. voted to increase its tipped minimum wage from $5.35 per hour to $10. This year, legislators have proposed raises to the tipped minimum wage in 17 states including Illinois, but no bills have yet passed, according to the Sun-Times.