Last month, Mayor Brandon Johnson called Chicago’s steep increase in its tipped minimum wage a “success.”
In fact, there’s little to celebrate one year after the city began to eliminate its tip credit. Data from the city of Chicago suggests the law has shuttered local restaurants, and federal data shows thousands of local servers and bartenders have lost their jobs.
Before July 1, 2024, Chicago’s tipped servers and bartenders earned a base wage of $9.48 an hour, where tips made up the rest of the full required minimum wage, which was $15.80. The difference between the two is called a “tip credit.” This system allowed employees to make well beyond the minimum wage through tips, as high as $40 an hour.
Starting last July, the city of Chicago began eliminating the tip credit, and will raise the base wage for tipped workers every year until it is as high as the regular minimum wage. Johnson promised this would make Chicago workers better off, but data shows the opposite is true.
Take the mayor’s claim that thousands of “jobs have been added” in Chicago since the law went into effect in July 2024, when the tipped wage rose from $9.48 to $11.02 an hour, on its way to full elimination in the next few years.
But the mayor’s statement was misleading, seemingly referring to broader job growth including industries not impacted by the tipped wage. Looking just at the full-service restaurant industry, affected by changes to the tip credit, federal Bureau of Labor Statistics data show Chicago metropolitan area full-service restaurants lost at least 1,000 jobs after the law went into place in July 2024. Elsewhere in the state, full-service restaurants added jobs over the same timeframe.
Job numbers are not the only thing Johnson got wrong in his celebratory remarks. In the same press conference, he claims Chicago restaurants are not suffering based on food license renewal data from the city’s Department of Business Affairs and Consumer Protection.
But our analysis of this data shows the number of renewed retail food and tavern licenses declined over the last year, dropping nearly 3 percentage points below the rate of renewals for all other business license types. The city license data also shows the number of new food or tavern licenses is more than 8% lower than a year ago, when the law went into place.
This is not surprising when looking around Chicago windowfronts. Local media have recently reported on a wave of restaurant closures across the city, including the loss of Gale Street Inn after its owners announced it would close after more than 60 years due to rising costs of doing business in the city.
As the city moves forward with raising the tipped wage further, these consequences only stand to get worse.
In Washington, D.C., where a similar experiment is underway, city leaders are having second thoughts. Restaurants in the District have lost roughly 5% of their workforce, closures are at a historic high, and workers have lost millions in earnings. The situation has gotten so bad, the City Council voted to freeze a pending increase in the tipped wage, and now is considering a broader repeal of tip credit elimination.
These are needless consequences for a law that servers and bartenders do not want. Nine in 10 tipped workers across the country prefer the existing tip credit system. They say without it, they would earn less money due to declining tips.
Johnson should know better. Instead of leaning on bad math and misleading “data” to claim all is well in Chicago, he should add up the consequences for Chicago’s restaurants and employees.