Ali Baker, a server at Dos Urban Cantina in the Logan Square neighborhood, feels lucky to work where she does. Her boss is kind, the restaurant is well regarded, and tips can be very good.
But on slow weeks, or when customers aren’t feeling so generous, Baker gets nervous. Like most restaurant servers across Chicago, Baker earns a base hourly wage of $6.40 an hour and relies on tips for the bulk of her income. Fluctuating paychecks — $200 on a bad week, $700 on a good one — can make it tough to pay bills.
“It’s depressing because I don’t feel like I can plan,” said Baker, 36, who is working part-time while she gets her associate degree and hopes to eventually get a master’s in social work. “I don’t know if I can rely on this job to have a kid or get a house. That just seems impossible.”
A proposed ordinance being considered by Chicago aldermen aims to tackle the unpredictability of the tipping system by eliminating the subminimum wage that allows employers to count workers’ gratuities toward their base pay.
Under the proposal, employers who now pay tipped workers as little as $6.40 an hour would have to pay them the regular minimum wage — which in Chicago is currently $13 an hour — a change that would drastically increase their labor costs and upend the business model of restaurants across the city.
Baker, who testified in favor of the change Tuesday at a hearing before the City Council’s Committee on Workforce Development, said the heavy reliance on tips prevents service workers from pushing back against unwanted advances from customers and creates numerous other problems.
But for her boss, Dos Urban Cantina co-owner Brian Enyart, doubling the wage of half of his staff presents a host of concerns when margins already are slim.
Enyart, who supports Baker’s advocacy on the issue, said offering his 19 employees a sustainable living is as important a goal as good food and happy customers, but he feels caught between his values and the realities of his balance sheet.
“How do you pay for that?” Enyart said. “I don’t know any of those answers.”
Nixing the subminimum wage is part of a proposed ordinance, introduced in June and boasting 37 sponsors, that would raise Chicago’s minimum wage to $15 an hour by 2021. It would also remove exemptions for several groups that are currently permitted to be paid less than minimum wage, including youth under 18, people in transitional jobs programs and employees of the city’s sister agencies, such as the Park District and Chicago Public Schools.
Several business groups oppose the bill, arguing high youth unemployment will only grow if businesses aren’t given an incentive to hire them. The accelerated timeline to a $15 minimum wage, when state law has the rest of Illinois reaching that level by 2025, also squeezes businesses in the midst of implementing another new city law requiring them to offer workers more predictable schedules.
“The mayor said she doesn’t want to push businesses out of the city, but the appetite hasn’t gone away to layer on the regulations and costs to employers,” said Tanya Triche Dawood, vice president and general counsel at the Illinois Retail Merchants Association.
But the most controversial part of the bill is the provision that would apply the minimum wage to tipped workers, which threatens not only bottom lines but cultural norms.
If passed as proposed, employers would have to pay tipped workers the city’s minimum wage of $15 by 2023, starting with a $2 increase next July and stepping up annually after that.
“It’s a belly blow to the restaurant industry in Chicago,” said T.J. Callahan, owner of Farmhouse Tavern on the Near North Side and Farm Bar in Lakeview. He is planning a new restaurant with no servers because of the threat of higher labor costs. “I truly believe it would mean lost jobs and restaurants would close.”
Mayor Lori Lightfoot’s office issued a statement supporting an accelerated timeline for reaching a $15 minimum wage, calling supporting working families “a top priority,” but did not broach the tipped wage topic.
Ald. Sophia King, 4th, chief sponsor of the bill, said there could be a compromise on the tipping provision to address the concerns of small independent restaurants, though she did not elaborate on what that might entail.
“We will continue negotiations to hear the stakeholders,” said King, who hopes to bring the proposal to a vote at the full City Council Oct. 16. “I don’t think we’re that far apart.”
While the proposed law does not seek to end tipping, but rather make it extra on top of a living wage, it disrupts a long-standing model that trusts customers to subsidize restaurant servers’ incomes.
Chicagoans are particularly generous tippers, leaving 16.7% on average, behind only Denver, according to a 2014 analysis of data from payment service Square. Illinois has the highest tipping rate of all the states in the union, with people leaving tips 61.7% of the time, according to the analysis, published in The Atlantic.
But America’s tipping system is also “fraught with abuse” and “underlying racism,” King said, referring to its purported origins after the Civil War when former slaves employed as waiters or railroad porters were paid nothing but tips.
Today, servers at higher-end restaurants can make a lucrative living on gratuities, but many tipped workers at small or inexpensive restaurants or in poorer neighborhoods barely scrape by.
Employers are legally required to make up the difference if an employee’s tips don’t add up to the regular minimum wage, but worker advocates say that doesn’t always happen because of exploitative practices or shoddy record keeping.
The average hourly wage of waiters and waitresses in the Chicago metro area, including reported tips, is $11.23, according to 2018 Bureau of Labor Statistics data.
Honni Harris, 46, said she left her job at a small Bronzeville restaurant last year because she would take home only $40 in tips after a shift, which wasn’t enough to pay her rent and her bus fare. The days when she’d “wear short dresses and heels” and make $200 or $300 are over, she said, and though she’s a better server now, that’s not always what customers reward.
Harris, who is now living at the Pacific Garden Mission homeless shelter, said being able to rely on $15 an hour, plus tips, would have made a big difference.
“We’re not trying to be greedy,” she said. “Thirty thousand dollars a year is not going to make anybody rich. We’re just trying to breathe a little.”
Chicago would not be the first place to require restaurant servers and other tipped workers — including hairdressers, car wash workers and airport wheelchair attendants — to be paid the full minimum wage.
Seven states — California, Nevada, Washington, Oregon, Montana, Minnesota and Alaska — have had such laws on the books for decades.
Flagstaff, Ariz., adopted what advocates call a “one fair wage” law after voters approved it in a ballot measure in 2016, but other recent efforts to spread the practice have been thwarted. Lawmakers in Washington, D.C., and Maine repealed voter-approved ballot initiatives creating a uniform minimum wage. Michigan’s legislature adopted such a law to preempt a ballot measure and then removed the provision for tipped workers, sparking a constitutional challenge by advocates that is now in state court.
A one-fair-wage provision was included in the $15 minimum wage bill passed in the U.S. House of Representatives earlier this year, and though it hasn’t been taken up in the Senate it drew national attention to tipped wage concerns. The federal subminimum wage for tipped workers, which hasn’t changed since 1991, is $2.13 an hour. It is in effect in 17 states.
‘Scary thing’ for restaurateur
In Chicago, Illinois Restaurant Association president and CEO Sam Toia urged lawmakers not to eliminate the subminimum wage but rather empower the city’s newly created Office of Labor Standards to penalize employers who violate the law requiring they make workers whole.
“Let’s put teeth in the ordinance to go after bad actors,” Toia said.
Michael Jacobson, president and CEO of the Illinois Hotel & Lodging Association, said eliminating the subminimum wage is “irresponsible” when it benefits so many. Banquet servers at one downtown hotel who earned a $10 hourly base wage ended up making $65 an hour with tips, Jacobson said.
While the proposed ordinance does not discourage tipping, Jacobson said the effect could be that tips and overall jobs decline. Faced with higher labor costs, employers may apply a mandatory service charge to bills and keep much of it to cover payroll, Jacobson said. Some hotels might eliminate room service, already an unprofitable perk that would become unsustainably costly, he said.
Longtime server Liz Hobart, who worked for 12 years at the French restaurant Le Bouchon in the Bucktown neighborhood before leaving this summer, worries that customers may be less inclined to tip well if they feel it is optional, rather than expected. She anticipates servers’ overall earnings would decline, at least at higher-end restaurants, and that could affect service and the desire to work in the industry.
“There would be a lot of people who would say I don’t want to do this anymore,” said Hobart, 48.
Research is limited on the consequences of eliminating the subminimum wage for tipped workers, and studies that have examined modest increases have had mixed findings: some find little effect on employment, others showed a rise in earnings but a drop in jobs. A 2016 report by a Census Bureau researcher found that the increase in wages paid by the employer were matched by a decrease in tips.
In an analysis last year on the potential impact of scrapping the tipped wage in New York, University of California at Berkeley labor researcher Sylvia Allegretto found it would likely result in modest menu price increases of about 8.3% and would not lead to big job cuts. She noted that the seven states that don’t pay tipped workers less than minimum wage “have thriving restaurant industries, where diners still tip at rates comparable to those in states where wait staff are paid subminimum wages.”
Baker, the server at Dos Urban Cantina, said concerns of a restaurant apocalypse are overblown. Before moving to Chicago she worked numerous server and bartending jobs in Washington state and California, and the restaurant scenes were strong and her tips didn’t suffer.
“Americans expect to tip,” said Baker, an activist with Restaurant Opportunities Center United, a worker center that advocates for one fair wage laws.
Her boss Enyart, meanwhile, is trying to get his head around how to make the math work if he can’t pay tipped workers the lower wage. Enyart, who opened Dos Urban with his wife in 2016 after 14 years working for celebrity chef Rick Bayless, said he wants to do right by his employees.
“The only reason we are successful today is because every single person who works for us is doing way more than I ever anticipated or asked them to do,” he said. “That gives me a sense of loyalty to the people who work here.”
Enyart, who plans to soon offer employees health insurance by adding a small surcharge on customer bills, recently shaved 10% off his liquor costs to help cover those benefits, and saved another $5,000 a year by changing the menu format and paper quality. But there is only so much he can trim from his budget before it starts to affect ingredient quality or the charitable events he says are important for forging relationships in the community.
Enyart estimates it would take raising prices by 20% to 30% to cover the higher wages, but he doubts customers will be willing to spend so much on Mexican-American cuisine. He worries about competing for customers with the dozens of new restaurants that have flooded into trendy Logan Square.
“It’s definitely a scary thing,” Enyart said. “I’m scared because I don’t understand how we can make more revenue to absorb that, I’m scared about what that means for the livelihood of back-of-the-house employees. I’m also scared of how it will change how employees and customers will engage with our restaurant.”
He is considering whether he could do away with tips, raise prices and pay everyone a standard wage, which would benefit untipped kitchen workers who earn much less than servers. But many servers and customers accustomed to the tipping arrangement might balk.
Enyart does not oppose the idea of overhauling the industry’s reliance on tips, but wants the leadership pushing for the change to provide a road map.
“What I wish for is a framework for how we can proceed to make enough money to stay in business and provide a sustainable wage for our staff,” he said. “Instead of putting a wall in front of us and saying now you have to get over it, show us where the stairs are.”