Last week, Chicago and neighboring Evanston made newsworthy decisions on the tipped minimum wage. Only one city got it right on behalf of tipped workers: Evanston city council decided to maintain the city’s tip credit in their consideration of future minimum wage hikes.
The tip credit system allows restaurants with razor-thin profit margins to stay in business while providing tipped job opportunities. Workers are guaranteed to make at least the minimum wage when their tips are factored in. Many earn much more. A survey conducted in August found local employees reported earning more than $28 per hour on average — double the regular hourly minimum wage in the Chicago area.
Evanston’s council members wisely avoided the consequences of tip credit elimination that have borne out across the country. States that have already eliminated the tip credit have the worst tipping percentages in the nation, leaving servers worse off than before. A newly published analysis of two decades of tipped wage hikes also finds that eliminating tip credits causes significant job loss for tipped employees. Washington, D.C., voted to eliminate its tip credit last November and is experiencing these effects firsthand.
The tipping system works by providing employees the ability to maximize their income well beyond a minimum wage. That’s why tipped restaurant employees around the country have
Unfortunately, Chicago’s tipped workers and restaurants may not be so lucky.