Chicago Has Begun Phasing Out The Tipped Minimum Wage

As of this week, Chicago is the largest city to independently phase out subminimum wages for tipped workers in the entire United States. The Minimum Wage Ordinance which was passed in October 2023 went into effect yesterday, July 1st, increasing the tipped minimum wage and standard minimum wage while also making positive changes for paid time off entitlements.

From here on out, all tipped hospitality workers will see their minimum wage grow by 8% every year on the first day of July for the next five years.

It is a move that will affect over 60,000 service industry employees said Mayor Brandon Johnson who called Chicago “the most pro-worker city in the country.”

According to Chicago.gov, the base pay for tipped minimum wage has increased to $11.02 per hour from $9.48 per hour. It will continue to rise annually until it matches the standard wage which yesterday increased from $15.80 per hour to $16.20 per hour for all businesses with more than four employees.

If a tipped worker’s wages do not equal at least the full minimum wage with tips included, the employer is now required to make up the difference and bring it up to at least $11.02 per hour.

Paid time off changes went into effect yesterday meaning that “employers must provide employees who work at least 80 hours within any 120-day period the ability to use Paid Leave for any reason for an Employee’s choosing.” Employees are now entitled to 5 days of paid leave and 5 days of paid sick leave within this period in a move which Mayor Brandon Johnson said doubles the paid time off for nearly 1.4 million workers.

The changes have been heavily negotiated over the last couple of years with the group One Fair Wage and city officials including Mayor Brandon Johnson coming up against opposition from groups including some members of the Illinois Restaurant Association who had cited fears of the changes potentially forcing them to raise prices, lay off employees, or shut down entirely.

The City of Chicago’s Minimum Wage Ordinance is likely to be keenly observed by cities and states across the country with many eager to see how it impacts Chicago’s hospitality industry.

Legislators in Illinois and 16 other states have already proposed raising the tipped minimum wage but so far no bills have been passed.