Chicago’s “One Fair Wage” ordinance, which began eliminating the tip credit starting in July 2024, was painted as a win for restaurant workers. The latest data dropped by the Bureau of Labor Statistics this month shows instead of winning, many workers are losing their jobs.
Just over a year into Chicago’s tip credit elimination law, tipped workers at local bars and full-service restaurants are already experiencing job losses at an alarming rate. According to the latest Bureau of Labor Statistics Quarterly Census of Employment and Wages (QCEW) data, employment in bars and restaurants in Cook County, where more than half of all these establishments are in Chicago, has fallen by about 8% since implementation of the law, representing thousands of lost jobs.
This decline is unique to the local area most affected by the wage hikes. Since July 2024, the rate of Chicago’s bar and restaurant employment loss has more than doubled the 4.0% decline in Illinois statewide. Chicago’s turn for the worse highlights how the city’s tip credit elimination law is accelerating job loss well beyond what other areas in the state are experiencing.
The contrast is even sharper when looking within the Chicago area itself. While bars and full-service restaurants have shed jobs at a steep pace, employment across all private industries in the city has declined by only 1.7% over the same time period. While the rest of the city has been subject to annually increasing minimum wage laws, this suggests the wage hikes targeting full-service establishments – an industry with characteristically razor-thin margins – are taking a particular toll on local bars and restaurants.
The closer the city gets to full tip credit elimination, the clearer it becomes that the policy is making it harder for Chicago restaurants and bars to stay afloat. Survey results recently released by the Illinois Restaurant Association confirm that owners across the city are feeling the strain of rising labor costs and mounting financial pressures. According to the survey, nearly 69% of restaurant owners have cut hours while 62% have reduced staff altogether. More than half have also postponed new hiring, and a third have reduced hours of operation.
In addition, prior EPI analysis of Chicago business license data showed that both new issuances and renewals of retail food and tavern licenses declined in the year after the law took effect. Altogether, these findings reveal an industry under increasing pressure, with both employers and workers feeling the squeeze.
These early impacts aren’t shocking. Chicago’s early declines mirror the experience in D.C., where the lost jobs, slashed tips, and closed restaurants got so bad the City Council voted to amend the law and protect the city’s tip credit.
Far from boosting workers, the elimination of the tip credit is driving job losses, shrinking hours, and forcing restaurants into survival mode. The data is clear – Chicago’s tip credit elimination experiment is sending the full-service industry into freefall. Unless policymakers rethink this approach, more closures and lost job opportunities are likely on the horizon for the Windy City.