Chicago Expected to Require Restaurants to Pay Standard Minimum Wage

Chicago is at the center of a heated debate over the practice of treating tips as wages.

Lawmakers in the city are considering a new law that would require restaurants to pay waitstaff the city’s standard minimum wage, regardless of how much they earn in gratuities, The Wall Street Journal (WSJ) reported Tuesday (Oct. 3). The proposal, which is expected to be signed by Mayor Brandon Johnson, would eliminate the longstanding system that allows tips to make up part of servers’ hourly wages.

The battle over tipping in Chicago sees the city poised to become the second-largest in the U.S. to eliminate the “tips-as-wage” system, according to the report. The largest city to make that change, Los Angeles, did so along with the rest of the state of California in 1976

The tipping fight in Chicago is not only pitting workers against restaurant companies but also raising questions about the fairness of the current system, per the report. Labor activists and some workers argue that restaurants use tips to subsidize low wages for waitstaff, who they believe should earn the same minimum wage as other workers.

On the other hand, restaurateurs and industry groups claim that changing the tipping system would disrupt their businesses, leading to higher menu prices for diners and staff reductions, according to the report.

The use of tablet credit card readers in recent years has led to a growing number of businesses asking for gratuities, often automatically prompting customers for tips, the report said. However, some consumers are experiencing “tip fatigue” as they struggle to determine what warrants a tip and how much to give.

Johnson, who was elected earlier this year, has been receptive to workers’ concerns, the report said. In a compromise reached with the local restaurant association, the city plans to phase out the tip credit over five years. The legislation is expected to pass the full city council, and Johnson has expressed his intention to sign it.

The modern gratuity system began in 1966 with the congressional introduction of sub-minimum wage for tipped employees, PYMNTS reported in August. Restaurant workers are paid as little as $2.13 per hour, as the rest of their hourly pay is presumably made up in tips.

However, that means the wages of servers and other employees depend on how many customers come in during a shift and how much is ordered.