As Chicago ends its tipped minimum wage, restaurants face an uncertain future

On Friday, October 6, Chicago’s City Council voted to pass legislation that will phase out the city’s sub-minimum wage for service industry workers. Under the “One Fair Wage” ordinance, the gap between the tipped minimum wage and standard minimum wage will be closed over a five year period.

City council members voted to pass the ordinance in a 36-10 vote, according to the Chicago Sun-Times. The regulation aims to create equitable wages for Chicgao’s tipped service workers, who currently earn $9.48 an hour plus tips, compared to the standard minimum wage of $15.80 an hour.

Under the new legislation, wages for tipped workers will gradually increase beginning on July 1st, 2024. According to the Sun-Times, service worker’s wages will increase by 8% each year until matching the city’s standard minimum wage by 2028.

Since the legislation’s introduction in July of this year, the One Fair Wage ordinance has faced scrutiny from the Chicago restaurant industry. The Illinois Restaurant Association lobbied against the measure, arguing that service workers currently earn the equivalent of $15.80 an hour or more under the tipped wage system. 

The association argues that no service employee makes less than the standard minimum wage under the tipped wage system. For tipped employees, if the combined pay of $9.48 per hour plus tips fails to meet or surpass the standard minimum wage, their employer must make up the difference. 

The Illinois Restaurant Association warned that the One Fair Wage ordinance could force restaurants to make staff cuts, institute service charges, and lead to widespread restaurant closures.

The association notes that when San Francisco passed similar legislation, restaurant closures in the city surged to an all-time high. The group also cites a recent survey of Chicago restaurant operators, in which 92% predict the ordinance would lead to increased menu prices, and three-fourths predict decreased earnings for workers overall.

Robert Gomez, owner of Chicago restaurant and music venue Beat Kitchen, thinks the ordinance will mean big changes for customers and restaurants alike. Gomez notes that the new ordinance is another blow to the service and entertainment industries, which have struggled to bounce back since the dawn of the pandemic. 

“They’re doing this at a time when all costs have gone up,” says Gomez, referring to the burden placed on restaurants due to rising inflation. Gomez noted that due to the new ordinance, restaurants will be forced to make some difficult decisions to ensure the longevity of their establishment.

Due to rising inflation and changing laws, some restaurants have experimented with technology-driven service models, utilizing QR codes and server-less ordering systems to cut costs.

Kevin Bryla, Chief Marketing Officer of point-of-sales company SpotOn, foresees a future where  serverless restaurants become more common.

“It is likely that restaurants will lean more on technology as a way to cut down on costs,” says Bryla, “Better handheld point-of-sale systems  QR code ordering are a few ways that restaurants can find operational efficiencies...all while protecting their razor-thin margins.”

The One Fair Wage ordinance has the potential to significantly impact the Chicago service industry in the coming years. For now, restaurants and customers will have time to adjust to the changes gradually and grow accustomed to new service experiences and standards.