Chicago becomes largest US city to independently abolish subminimum wage for tipped workers

In a 36-10 vote, aldermen approved the measure that advocates said was direly needed for the lowest-paid service workers and that opponents countered would backfire, causing some employees in the service industry to be paid less and lead to higher menu prices and staff cuts. The ordinance becomes law immediately but the full impact won’t take effect for five years.

Starting next July, the gap between tipped and minimum wages will shrink from 60% to 40%. Each year after, that gap will shrink by 8% until parity is reached by July 1, 2028.

In a celebratory post-council news conference, Johnson said the vote made Friday an “incredible, historic day.”

“The ordinance embodies Chicago’s values of uplifting working people and addressing systemic inequities in the restaurant and hospitality industry, which, in turn, will create a better economic future for tipped workers and our city,” the mayor said. “Many of the people who are standing in support with us today, these are heads of households and anchors of communities who are finally receiving a bit more of the respect and dignity that they deserve.”

Los Angeles, which has a larger population than Chicago, already bans a subminimum wage for tipped workers but that’s under a California state law that requires employers to pay those employees the full minimum wage. Besides California, Alaska, Minnesota, Montana, Nevada, Oregon and Washington also have abolished the lower tipped wage, according to the U.S. Department of Labor.

Ahead of the vote, progressive aldermen stood up and shared anecdotes that fueled their decision to favor the new law on what they described as a poignant day. Ald. Jessie Fuentes, 26th, one of the measure’s lead sponsors, said the subminimum wage for tipped employees has long been a driver of income inequality.

She pointed to the sea of pink-clad service workers behind her who were recruited by the national One Fair Wage campaign to cheer on the ordinance.

“Today, our tipped workers will win,” Fuentes said. “Look at the room. Look at the room. Those are Black and brown faces that are asking for a raise.”

Some aldermen lamented that the moment did not come sooner, such as when the City Council raised the minimum wage to $15 under former Mayor Lori Lightfoot but did not alter the pay floor for tipped workers.

Ald. Rossana Rodriguez Sanchez, 33rd, said when that vote passed four years ago a man sitting in the back of the public gallery in the council chambers yelled, “You left out tipped wage!”

“He yelled that so many times, and I felt that in my heart. I knew that that moment was an opportunity for us to do that, and we didn’t do that,” Rodriguez Sanchez said. “It took us four more years and a progressive movement to push for this and be able to pass it now. … Wherever he is, this vote is dedicated to you today.”

But Ald. Nicole Lee, 11th, said the small business owners in her ward that encompasses Chinatown — where family restaurants have served as a time-honored engine for economic mobility — implored her to oppose the measure even though they knew it likely would pass.

“My constituents there feel this is going to hurt more than it is going to help our local economy,” Lee said. “Because of that, I’m going to be a no.”

A man in the public section then cried out, “Thank you for saving my job.”

Other opponents have argued that evening out the minimum wage across all industries will cause people to tip less, hurting servers’ bottom lines. Ald. Nicholas Sposato, 38th, said instead of raising the minimum wage for tipped workers customers should be “educated” on how to tip better because, “I believe we are going to get destroyed with this.”

Ald. Daniel La Spata, 1st, who represents the neighborhoods of Wicker Park and Bucktown that are hubs for restaurants, rejected the business community’s anxieties by declaring to any servers listening in: “I don’t need to balance my bill on the backs of your poverty.”

“The sky maybe is going to fall in when we pass this ordinance, but the sky didn’t fall in when we fought for and won a $15 minimum wage,” La Spata said, before listing other pro-labor ordinances passed in Chicago. “The sky keeps on not falling. … Somehow I have a feeling that the sky is not going to fall today either.”

Johnson campaigned on the issue and this summer donned a One Fair Wage apron at a progressive conference, serving appetizers in solidarity with the conference’s catering staff. In his post-council victory lap, he hugged leaders and supporters of the One Fair Wage campaign who extolled “the Chicago miracle” that they predicted will spread across the nation.

The push has seen false starts before, leading to disappointment alluded to by more senior progressive members of the City Council. Shortly after taking office, Gov. J.B. Pritzker signed a bill raising the state minimum wage to $15 per hour by 2025. But the law preserved the lower pay floor for tipped workers after business interests killed discussions about abolishing it.

Months later, a similar loss for progressives played out in the City Council. In November 2019, aldermen voted to raise the city’s minimum wage to $15 by 2021. It was one of Lightfoot’s early legislative achievements, seeking to balance worker advocates’ interests against those held by restaurant industry groups.

Opponents of eliminating the subminimum wage argued that tacking a wage increase for those in the service industry on top of raising the main minimum pay would be too tight a squeeze for small businesses. That argument prevailed, with supporting aldermen tabling the tipped wage changes to win the more pressing $15 minimum wage hike.

The restaurant lobby, a longtime foe of the effort and similar attempts to do away with the lower tipped wage, in September begrudgingly accepted a deal from the current mayor’s administration that increased the phase-in from two years to five. That was after the head of the Illinois Restaurant Association, Sam Toia, floated a counterproposal to raise subminimum wages only at restaurants earning more than $3 million in annual revenue. That offer failed to gain traction.

“Obviously, a lot of restaurant owners, operators will tell you, the last couple of years have been really rough coming out of the pandemic, especially with double-digit inflation,” Toia said last month. “There’s only two things you can control in the restaurant industry: your product costs and your labor costs. … There could definitely be people cutting back on labor.”

However, the mayor’s floor leader, Ald. Carlos Ramirez-Rosa, 35th, has argued raising minimum pay for tipped workers is good for business.

“We have decades of research: Los Angeles, Minneapolis, cities across this nation with economies very similar to ours have already instituted One Fair Wage with tips on top,” he said during a council committee meeting last month. “Restaurants are opening up, restaurants are growing, restaurants are employing more workers and workers are making the same — or more — in tips.”

The ordinance was originally supposed to get a final vote on Wednesday, but the city clerk’s office failed to post the item on the council’s agenda with enough advance notice, as legally mandated. A group of moderate and more conservative members tried to stall an attempt to reschedule the vote during the Wednesday council meeting but were squashed by Johnson allies.

The city’s minimum wage rate is $15.80 per hour for businesses with 21 or more workers and $15 per hour for those with four to 20 workers. Under the old law, tipped workers were paid 60% of the minimum wage rate and if a tipped worker’s wages with the addition of tips did not equal at least the full minimum wage, the employer had to make up the difference.