Editor’s note: On September 20, the Workforce Development Committee voted 9–3 to advance the ordinance ending Chicago’s subminimum wage to the full city council.
A proposed ordinance moving through the complicated world of city council committees would require businesses to pay their tipped employees—like bartenders, bussers, and servers—at the statewide $15.80-per-hour minimum wage instead of the local $9.48-per-hour subminimum wage.
The proposal, first introduced in July, had languished because of business pressure. But it’s been given new life in recent months. The recent motion has drawn ardent responses from restaurants and workers alike, each of whom will be affected by the $6.32 increase in wages that would phase in over a five-year period.
Antoinette Simmons, a 20th Ward resident, spoke at an early September Rules Committee hearing on the ordinance on behalf of tipped workers who are the sole breadwinners for their families. “We’re not going back to work because it’s not livable, the wage isn’t livable, and we need it to live and take care of our families to be stable,” Simmons said.
Jesse Fuentes, the 26th Ward alderperson, introduced the measure. But its contents are spearheaded by Chicago organizers and workers, part of One Fair Wage (OFW). OFW is a national coalition seeking to end subminimum wages across the U.S., and to make fair wages and working conditions in service jobs more sustainable for businesses.
Tipped workers have a poverty rate more than twice that of nontipped workers, according to a 2014 joint report by the Economic Policy Institute and the Center on Wage and Employment Dynamics at the University of California, Berkeley cited in the proposal. The Bureau of Labor Statistics shows two million people in the U.S. work as restaurant servers—70 percent are women—and they rely on food stamps at a rate one and a half times greater than the general working population.
The way wages are structured now pressures workers into tolerating harassment and abusive behavior by customers out of fear of losing tips. But a fair wage, the ordinance argues, would give employees more independence, as it’ll empower them to quit jobs where they feel threatened by the actions of an employer or customer.
Nicola Giuseppe Persico is a professor at Northwestern University’s Kellogg School of Management whose research looks at the study of individuals, business decisions, and labor economics. Persico says that economists are somewhat divided about the impact of minimum wage increases on employment. On one hand, some economists believe increasing the minimum wage reduces employment because some workers become too expensive to be employed profitably. Persico says this makes sense from a theoretical perspective, but other economists look at the data and have a hard time finding the so-called disemployment effects.
Today, the profession more or less accepts that any impact on employment is minor—but Persico has studied only small minimum wage increases, like 75 cents an hour, that phased in over several years. In terms of the impact on workers, his research shows raising wages makes workers more productive because they value their current employment more.
“So if their wage goes up due to a minimum wage increase,” Perisco said, “they’re going to work harder to keep their job.”
Research from the National Employment Law Project shows that local and state-level minimum wage increases boost income for low-paid workers without reducing overall employment. On top of that, businesses can absorb many of the costs of higher wages from having higher employee productivity and less employee turnover.
The Illinois Restaurant Association has argued against the proposal, and recommends that, instead, the city should beef up enforcement against employers, who are required to make up the difference if a tipped worker makes below the $15.80 hourly minimum wage. The association prefers that the city just impose stiff penalties on restaurants who don’t comply, an alternative that would cost less for businesses overall.
A survey of 315 Chicago restaurants, conducted by a Pittsburgh-based marketing research and consulting firm for the restaurant association, lists several consequences restaurants say their customers and employees will suffer if forced to adopt the tipped minimum wage hike. A majority of restaurants surveyed say they’ll raise menu prices, reduce employee hours, and eliminate or consolidate staff positions to deal with the new cost burden.
Three-fourths of surveyed business owners would lay off some tipped workers, while half said they’d lay off a “significant” number of tipped workers. Almost all restaurants say they’d increase prices, with 60 percent saying their prices would significantly increase.
At the September hearing, Patrick Doerr of the Hospitality Business Association of Chicago asked the committee for accommodations on the bill to help businesses weather higher costs, expenses, and challenges.
First, he asked that the city consider a slower implementation structure for employers with between four and 20 employees, giving them the same incremental accommodations they were allowed when the $15.80 minimum wage ordinance passed in 2018. Second, Doerr asked that outdoor dining programs for breweries, taverns, and music venues be extended this fall, “so they can plan ahead and have the economic certainty of knowing they’ll be able to offer outdoor dining in 2024–2025.” Doerr said that Chicago’s taverns and smaller retailers need outdoor dining to absorb higher labor costs.
He argued that the number of traditional taverns in Chicago, and the number of people they employ, has continued to decline since the onset of the pandemic, and half of them never received major federal aid.
Doerr told the Rules Committee that although 2023 sales numbers for businesses have been touted as exceptional, they’re still below 2019’s through the first half of 2023 when adjusted for inflation. “People are not selling or buying more products, or visiting their neighborhood places more; prices have just gone up due to inflation,” Doerr said.
Terri Evans, owner of Windy City Ribs & Whiskey, met OFW organizers after purchasing her restaurant in 2018. Evans has an MBA from Northwestern and spent 17 years in corporate America before entering the food industry, so she notes she’s the first to say that profits have to make sense for her to be in business at all.
“I was blown away when I walked into the kitchen and realized that people have worked in this industry for decades and had no savings,” Evans said. “I was like, ‘How do people show up for work in these hot kitchens, in these environments, hour after hour, and have nothing to show for their family beyond the wages that they get and they’re struggling to pay their bills?’”
Evans took it upon herself to learn about the imbalanced wage system in the food industry and “ripped the Band-Aid off” to pay her tipped workers at nontipped minimum wage, although it was difficult. She went through training with OFW, who walked her through how to do it—and how to do so sustainably.
“A lot of the restaurants here will say this is impossible. Well, I’ve done it. And I’ve been able to scale while doing it. So it is possible. It’s about knowing the narrative of your numbers,” Evans said. “It’s been tough. It’s been a challenge. But do I go to sleep better at night because I can feed the people that are working for me every day?”
Nataki Rhodes is OFW’s Illinois organizer. She’s been a tipped worker for over 15 years, and has made subminimum wage through two mayoral administrations. Rhodes told the Rules Committee that this issue should have been “taken care of” when the city raised the minimum wage in 2018, but tipped workers were left out. Rising prices, inflation, and rent increases don’t only affect businesses, Rhodes said. They impact tipped workers as well.
“We are labeled workers with no union. But we’re still workers here serving every time you come to the restaurant. Every time you go to an Applebee’s, every time you go to an Original House of Pancakes, we are there to serve you. And so we deserve this raise,” she said. “We’ve been at the table, but we’ve been looked over. And so we’re just grateful to move this process forward.”
