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Chicago eliminates subminimum wage for tipped workers. Here's what that means

The vote passed Chicago City Council 36 to 10

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Editor's Note: The video above is from an earlier report.

Chicago's City Council on Friday voted to approve "One Fair Wage," an initiative that effectively ends subminimum wage for tipped workers.

The vote, which passed 36 to 10, initially passed a council committee last month. The initiative, which allows tipped workers to make the same minimum amount as other workers in Chicago, was then sent to full council for a vote earlier this week.

The change means raising the minimum wage for tipped workers from $9 to $15.80 per hour, though such employees could still get tips. Under the guidelines, the $9 hourly wage would rise by 8% for five years until it reaches the $15.80 total. According to organization Women Employed, which supported the initiative, the move makes Chicago the largest city in the country to independently phase out subminimum wage for tipped workers.

The raises will begin July 1, 2024, according to officials.

"For anyone that is afraid that for some reason tips will go away once the base wage for workers goes up a little bit, that tips will go away, the data shows that that's simply not true," Ald. Carlos Ramirez-Rosa said during an at-times heated debate last month.

The proposal was recently backed by the Illinois Restaurant Association, which agreed to a compromise on the proposal, despite its reservations. The association's president Sam Toia called the five-year plan to raise the subminimum wage a "compromise we can all live with."

The debate comes as many across the U.S. have a negative view on tipping, according to a new survey, and as "tipping fatigue" has heightened.

Some advocates say the move will offer a fair wage for many restaurant workers who have long gone underpaid, but others have acknowledged the change could put increased pressure on restaurants.

Some have cautioned that changes to labor costs could end up costing consumers even more, as many already battle surcharges due to inflation and more.

BankRate reported recently that a survey found "roughly two in three U.S. adults have a negative view about tipping." But at the same time, 41% of Americans said they believe "businesses should pay employees better rather than relying so much on tips."

"In industry, an operator only has two things that he or she controls - that's either product costs and, or labor costs because fixed costs are fixed costs," Toia told NBC Chicago over the summer.

Still, according to the BankRate survey, fewer people are tipping waitstaff every year, with only 65% saying they always tip a server when dining at a sit-down restaurant, down from 73% in 2022 and 75% in 2021.

The One Fair Wage movement looks to lobby for similar changes for tipped employees across the U.S.

“There are 10 states that are going to move this in the spring and there are four more states where this is going to be on the ballot in November," said One Fair Wage founder Saru Jayaraman.

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