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As the calls for raising the tipped minimum wage grow louder in Illinois, a new study reveals raising the tipped minimum wage has a significant negative impact on state tip percentages in full-service restaurants.
A new proposal would give restaurants two years to have all tipped workers increased to Chicago’s minimum wage, which is $15.80 an hour, plus any tips they earn. Tipped workers currently make $9 an hour plus tips, but employers are required to make up the difference if the combined amount of hourly pay and tips does not equal the full minimum wage.
Chicago Mayor Brandon Johnson has endorsed the One Fair Wage movement, saying workers who earn the so-called tipped minimum wage are more vulnerable to sexual harassment and abuse than other employees.
“This is about investing in people, Black women, brown women, heads of households, because by investing in people we strengthen the backbone of our economy,” Johnson said.
Rebekah Paxton, director of research at the nonprofit Employment Policies Institute, said one-flat-wage states see lower tips and some workers will most likely lose their jobs.
“American economists across the board agree that if you raise the minimum wage, jobs suffer, because obviously that raises labor costs for any business,” Paxton said.
The Illinois Restaurant Association has gone on record opposing the idea, saying it will reduce the workforce in bars and restaurants.
Paxton said there has been pushback from tipped restaurant employees, including servers and bartenders, who say it would result in lower tip income.
“They don’t want this to be changed because essentially it turns it into a flat wage job,” said Paxton. “A lot of people are attracted to the hospitality and restaurant industry because they can make tips and interact with customers, so a lot of servers are pretty opposed to this.”
The research shows that six out of seven states that have eliminated their tip credit are in the bottom half of all state tipping percentages.
The statewide minimum wage in Illinois increased to $13 on Jan. 1, and will increase to $14 Jan. 1, 2024. Tipped workers get 60% of the state’s minimum wage or $7.80 per hour for workers age 18 and older. A proposal to bring a minimum wage for tipped workers statewide never advanced at the Illinois Statehouse.
* Notice a couple of things missing? 1) Tips might fall, but there’s no mention of its impact on actual take-home pay for workers; 2) The “six out of seven states that have eliminated their tip credit are in the bottom half of all state tipping percentages” line doesn’t have any real context.
The chart they reference (click here) shows that most states, even if the state’s minimum is pegged to the federal tipped minimum wage of $2.13 per hour, averages tips between a bit above 19 percent to a bit above 21 percent. Indiana, which is near the top of the tipping scale, mandates the $2.13 per hour federal tipped minimum wage. So, take-home for those workers is gonna be rotten regardless, unless they work at a relatively high-end restaurant.
Another reference used in the website is this list from March which shows that California is dead last, but it’s still at 17.5 percent, which is only about a point and half below the national average. Chicago, which is debating the tip proposal, is currently at 19.3 percent, and that’s right around the national average. The rate could very well drop, but could a close to $7 an hour raise make up for it? The article doesn’t say.
And, yeah, you can have a good night working for tips, but you can also have lots of horrible nights. It’s very difficult to plan. I’ve lived on tips in a past life. Didn’t care for it, even though I was pretty good at it. But some customers can be such jerks.
* The One Fair Wage group claims that shifting to a higher minimum wage would also help attract workers back to the industry. The Illinois Restaurant Association, despite its claims above that servers prefer living on tips, has frequently bemoaned a worker shortage over the past few years.
I dunno. I’d like to see more data on all of this.
But what I do know from experience is that a lot of people out there seem to relish the power that comes from tipping. You can really mess with somebody by withholding tips for any reason at all, and everyone involved knows it. You can also assure preferential service over others by regularly tipping well (and I am totally guilty of that). I lived in Germany for a couple of years as a young person, and I greatly preferred their no-tip system. Just pay everybody a decent wage and let management be responsible for disciplining staff.
In the meantime, though, let’s talk about what’s actually on the, um, table.
posted by Rich Miller
Monday, Jul 24, 23 @ 1:32 pm
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This would solve a lot of classification issues. I don’t think I’ve ever seen a restaurant operate that didn’t have servers engaged in non-tipped activities where for at least part of their shift they should be earning the minimum wage.
Comment by Candy Dogood Monday, Jul 24, 23 @ 1:50 pm
Fun with graphs:
The graph at the link is quite…something. Starting at 18% instead of 0%, the narrowness of the demarcations of the x axis, the $2 steps in the x axis - all make the tined line steep. This should basically show an even flatter line.
Comment by Lefty Lefty Monday, Jul 24, 23 @ 2:00 pm
Wage theft is rampant in the restaurant industry. As Candy Dogood mentions above, tipped workers are often required to spend significant time doing non-tipped work but not being paid the appropriate rate. Also, restaurants that tip pool are ripe for abuse and theft. Even in Chicago & Cook County where workers have some of the best protections in the state, restaurant workers still suffer from unfair scheduling, wage theft, denial of any real benefits, rampant harassment and so much more. Raising the sub-minimum wage is just the tip of an ice berg of issues in that industry. There should be a holistic approach to improving working conditions that includes an elimination/reduction to the tip credit to address the issues in the industry
Comment by The Office Monday, Jul 24, 23 @ 2:09 pm
===“American economists across the board agree that if you raise the minimum wage, jobs suffer, because obviously that raises labor costs for any business,” Paxton said===
This hasn’t been true since the 90s thanks to Card and Krueger. In fact, there’s evidence now that raising the minimum wage can, in the instance of monopsony, actually *raise* employment levels.
Comment by Nick Monday, Jul 24, 23 @ 2:19 pm
===…and I greatly preferred their no-tip system. Just pay everybody a decent wage and let management be responsible for disciplining staff.===
Agree 100%.
The first time I visited Ireland I was at a Dublin pub. Ordered a pint from the bar tender and left the change on the bar and went back to my table. A minute later the bar tender came over and told me I forgot my change and handed me back my money.
The newest US restaurant trend I’ve noticed post-pandemic is the service charge on the bill that nobody mentions and tips are expected on top of that. I have always been a generous tipper, but I don’t want to feel like a mark. I’d trade additional tips for a service charge all day long, which is how the European model basically works. Prices reflect service costs. As they should.
Comment by 47th Ward Monday, Jul 24, 23 @ 2:20 pm
=== Notice a couple of things missing? ===
Yes. Interviews with a representative sample of workers. Paxton says, “a lot of workers” do not want this. She argues there has been pushback.
Evidence? Representativeness?
I can imagine both sides being represented. I would prefer to know the numbers. A few very well tipped servers in very fine restaurants obviously might suggest there is no need to change anything. After all, they are doing quite well.
But most servers in America and Illinois are not working in fine restaurants, making living wages after tips. Most are making less than minimum wage, especially in places where the tipped wage minimum is $2.00 - $2.50.
Survey these “waitresses”(gender intended). I bet most across the state would prefer a guaranteed $30,000 a year across two similar jobs, relative to unpredictable earnings and tips and hours across multiple jobs.
Comment by H-W Monday, Jul 24, 23 @ 2:22 pm
–The Illinois Restaurant Association has gone on record opposing the idea, saying it will reduce the workforce in bars and restaurants.–
I did work just this morning for an upper end restaurant. As they wrote the check for me they again bemoaned “nobody wants to work (servers) anymore”. Thats why they can’t reopen for lunch.
I guess this means they’re understaffed. So how is it possible they believe this will make their problem worse if they can’t get help anyway?
I feel sorry for many, if not most, restaurant workers. I’m happy to pay more–and tip well.
Comment by Stix Hix Monday, Jul 24, 23 @ 2:23 pm
Most tip workers I know like the tips.
Comment by Annonin' Monday, Jul 24, 23 @ 2:28 pm
America really struggles to get past all of the things we only started doing because of slavery and blatant discrimination. Just because it is the status quo doesn’t mean it got that way for a good reason.
===Most tip workers I know like the tips. ===
The tips don’t go away. They just become something that is done to recognize good service, not an obligation to pay the person who takes our order and serves you at the restaurant.
===Wage theft is rampant in the restaurant industry.===
The impact on social security alone would be huge. Such a significant portion of tips aren’t claimed and wind up letting the employer skip out on the employer’s share of payroll taxes.
Comment by Candy Dogood Monday, Jul 24, 23 @ 2:33 pm
Candy Dogood can you walk me thru how “such a significant portion of tips aren’t claimed?” these days? At least in Chicagoland?
Customers have shifted overwhelmingly to card payments (and card tipping). Any Chicago bar or restaurant is likely over 80% - probably 90% - card transactions these days. One reason PPP grants during pandemic actually kind of worked for lot of places in hospitality is because most places tips are off electronic payments and thus declared on payroll tax filings (which were basis of PPP loan amounts).
There might be arguments for or against tip credit but the servers and bartenders raking in undeclared cash tips hasn’t been true in NE Illinois for a long time. Can’t speak to downstate tipping habits of course. Cheers (banned punctuation)
Comment by ChicagoBars Monday, Jul 24, 23 @ 3:07 pm
==== Any Chicago bar or restaurant is likely over 80% - probably 90% - card transactions these days. ====
I agree. But I still try to pay cash unless it’s a large bill and I am light in the wallet. I just did it 30 seconds ago. Pretty sure it’s much appreciated still.
Comment by Not Declaring Tips Enabler Monday, Jul 24, 23 @ 3:24 pm
Shriver Center with some context:
‘Tipping proliferated in the United States after the Civil War, when the restaurant and hospitality industries hired newly emancipated Black women and men but offered them no wage–leaving them to rely on patrons’ gratuities for their pay instead. Simply put, tipping was introduced as a way to exploit the labor of former slaves.
“It’s the legacy of slavery that turned the tip in the United States from a bonus or extra on top of a wage, to a wage itself,” explains Saru Jayaraman, co-founder of Restaurant Opportunities Centers United (ROC United).‘
When restaurant and bar owners tell you they dont want to pay their workers a living wage because they might have to lay people off, start cackling.
You need the number of servers that you need.
What it does mean is that favoritism among restaurant managers who routinely give the best shifts to their personal favorite servers will come to an end. It is a system riddled with racism, sexism, sexual harrassment, wage theft and abuse. Managers get away with it because they control whether you work Friday nights or Tuesday lunches. Who gets to leave early and who has to stay and close and do all of the side work.
Tell the owners that are complaining to open their books. I just read that 18 of the top-grossing restaurants in America are in Chicago.
Comment by Thomas Paine Monday, Jul 24, 23 @ 3:51 pm
Two weeks ago in Spokane, for the first time I came across a restaurant that stated on the receipt a required tip of 15% that was divided among all workers. It also said I could leave a personal tip for my server above and beyond that. I looked at that for the longest time, trying to decide if I should leave more and how much.
Comment by Proud Papa Bear Monday, Jul 24, 23 @ 4:04 pm
My opinion: Your business. Your obligation to pay your employee’s wages. Full stop.
(For the record, I do still tip even though I hate it. I refused to take America’s messed up economic practices out on a worker trying to make rent).
Comment by Former Downstater Monday, Jul 24, 23 @ 4:33 pm
I would be trying to decide how to most quickly exit that establishment. Tip sharing is abhorrent.
Comment by Captain Obvious Monday, Jul 24, 23 @ 4:34 pm
Thanks to @Thomas Paine for the historical background on tipping. I was not aware of that and wondered what @Candydogood was referencing.
Comment by JS Mill Monday, Jul 24, 23 @ 5:48 pm
=== “such a significant portion of tips aren’t claimed?” these days? At least in Chicagoland?===
There’s lots of ways to administrate tips being reported by a server to their employer and while I am sure its possible to have one that automatically reports your credit card tips to your employer’s payroll so that they are included on the employee’s W2 as wages with the appropriate amount of taxes paid by both the employee and the employer, I’ve not actually seen that system, though I’m not really in a place where I’m looking for one.
Servers that do not report 100% of their tips to their employer to be included on their W2 are short changing their own retirement and doing their employer a favor by allowing them to understate their portion of the payroll taxes.
And even if they do report 100% of their tips, their employer may not be handling the paperwork appropriately.
Comment by Candy Dogood Monday, Jul 24, 23 @ 6:49 pm