Here's what to know about Chicago’s minimum wage increase for tipped workers

Tipped workers are now making more in Chicago.

The city’s tipped minimum wage increase began July 1 after the City Council passed an ordinance in October to increase the tipped minimum wage by 8% each year for five years until it reaches parity with the Chicago’s standard minimum wage.

Here's how the increase works, and how different sides of the industry are reacting to the change:

How much is Chicago’s new tipped minimum wage?

On July 1, the tipped minimum wage in Chicago increased from $9.48 per hour to $11.02. The city’s overall minimum wage also rose from $15.80 to $16.20 per hour for employers with four or more workers.

In October, the Chicago City Council passed an ordinance to increase the tipped minimum wage by 8% each year for five years until it reaches parity with the city’s minimum wage.

What is a tipped minimum wage?

Tipped workers, such as restaurant servers, receive tips as part of their earnings so their hourly minimum wage rate is lower.

Under federal law, if a tipped worker’s wages plus tips don't equal at least the full minimum wage, the employer must pay them the difference. The federal Fair Labor Standards Act created the “tip credit” system and also guarantees that tipped workers must earn at least the full minimum wage in any case.

However, employers don't always comply with the law.

Did Illinois or Cook County’s minimum wage increase?

On Jan. 1, Illinois’s full minimum wage rose to $14 per hour from $13 for workers 18 years and older.

Beginning July 1, the full minimum wage in Cook County rose to $14.05 per hour.

The wage for tipped employees in the state and Cook County is $8.40 per hour.

How much is the federal minimum wage?

The federal hourly minimum wage is $7.25 and $2.13 for tipped workers, according to the U.S. General Services Administration website.

Many states set their own minimum wage and some counties and cities do too. The highest local minimum wage should prevail for a worker.

Why is Chicago’s tipped minimum wage controversial?

Advocates and supporters of Chicago’s ordinance demand better wages and conditions for workers as the cost of living rises. But restaurant associations say that federal law already ensures a full minimum wage. They also contend that Chicago’s ordinance will reduce earnings for tipped workers and raise expenses for restaurateurs still recovering after the pandemic and battling soaring inflation and other pressures.

Rather than requiring Chicago restaurants to hike the tipped minimum wage, Sam Toia, president of the Illinois Restaurant Association, urged hefty fines and crackdowns on employers who don’t pay the legally guaranteed minimum wage. Chicago should “add more inspectors and go after bad actors,” he said.

As restaurants in Chicago and across the U.S. continue to face headwinds after the pandemic, the impact of the city’s ordinance will be closely watched.

Why are some restaurant owners and others pushing back against Chicago’s law?

Some contend that restaurants will have to raise menu prices as their labor costs increase, especially amid ongoing struggles with inflation. Subsequently, customers will tip less if food prices go up and if servers’ base pay is raised, they said. Restaurant owners could also downsize waitstaff or shift to counter service to cut costs.

“Restaurants will not be able to sustain another hit like this,” Niles Mayor George Alpogianis said, who owns eight restaurants, including Reunion at Navy Pier and Kappy’s in Morton Grove.

What do restaurant servers think about the tipped minimum wage increase?

Some support it. Some are opposed to it.

Cheryl Taylor, a bartender at The Quarry in South Shore, welcomes the ordinance. “Servers are at the mercy of customers. You can’t presume they will tip 20%,” she said.

But sometimes servers can be the highest-paid employee in a restaurant and earn more than the manager, said Sean Kennedy, the National Restaurant Association’s executive vice president for public affairs.

An independent survey of 315 restaurants commissioned by the Illinois Restaurant Association found that workers earn an average hourly wage of $28.48.

Nationally, tipped servers make a median of $27 per hour, according to the National Restaurant Association. The highest-paid tipped workers make more than $41 per hour.

Who else has raised their tipped minimum wage?

For years, only seven states didn't use the tipped minimum wage. Restaurant workers earn the full minimum wage plus tips in: California, Oregon, Washington, Nevada, Minnesota, Montana and Alaska.

This year, legislation to raise the tipped minimum wage was proposed in 17 states, including Illinois, but none passed, according to the National Restaurant Association.

The advocacy group One Fair Wage spearheaded the campaign in Chicago to increase the tipped minimum wage and eliminate the tip credit system. It also led a similar law in Washington, D.C., that went into effect last spring.

In May 2023, Washington’s tipped minimum wage increased from $5.35 per hour to $6 then to $8 by July 1, 2023. It rose again to $10 per hour on July 1.

After the act went into effect, the number of employees at full-service restaurants dropped by 1,900 in about a year — from 30,500 in May 2023 to 28,600 in April 2024, according to data from the Bureau of Labor Statistics.

It’s unclear why the restaurant jobs were shed, but the National Restaurant Association attributes the decline to the new policy.

Meanwhile, the number of employee at limited-service restaurants in Washington, D.C., rose from 13,900 in May 2023 to 14,200 in May 2024, according to the BLS.