Study: Restaurant industry thrives in cities that have eliminated subminimum wage

As Mayor Lori Lightfoot and City Council members debate changes to how Chicago’s tipped workers are paid, a new report highlights how other cities have fared after eliminating the subminimum wage.

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Photo by Yingxu Jane Hao

Fast food workers, Fight for $15, Black Lives Matter activists and others march outside a downtown McDonald’s demanding that the Illinois General Assembly pass a $15 minimum wage increase on April 4, 2017.

Mayor Lori Lightfoot’s proposed increase to the tipped minimum wage – from the current hourly rate of $6.40 to $8.40 next year – could “actually be harder for restaurants” than increases in cities that are eliminating the separate tipped minimum wage, said Saru Jayaraman, president of One Fair Wage, a national group campaigning to eliminate the tipped minimum wage.

That’s because cities like San Francisco, Seattle , Minneapolis and Flagstaff are moving — or have moved — to a single minimum wage by raising restaurant worker’s wage rates more gradually, over a period of several years. A $2 jump in a single year will be a more difficult adjustment, said Jayaraman, who’s also director of the Food Labor Research Center at University of California at Berkeley and a co-founder of the Restaurant Opportunities Center United, which organizes restaurant workers.

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A report from One Fair Wage on tipped workers in Chicago has been widely cited, as support in the City Council has grown for eliminating the subminimum wage. Ald. Sophia King introduced an ordinance that would include tipped workers in a minimum wage increase. That report found that four of the five lowest-paid occupations in Chicago are in tipped occupations, and that the city’s tipped workers, nearly two-thirds of whom are people of color, are three times more likely to live in poverty than the general workforce. Black women who are tipped workers fare the worst, with one-third living in poverty. Roughly half of them depend on food stamps to make ends meet, and 45% are on Medicaid, according to the study.

There’s more to that report, though. Its findings undercut the restaurant lobby’s claims that eliminating the subminimum wage for tipped workers would hurt the economy and lead to job loss. 

One Fair Wage reports that in large cities in seven states that have eliminated the subminimum wage, the number of full-service restaurants has grown by 17.4% since 2011, three times as fast as in Chicago. Over the same period, restaurant employment grew by 24.6% in those cities, compared to 16.1% in Chicago, according to the study.

According to Jayaraman, those cities also have higher tipping rates.

Low wages and high poverty rates among tipped workers “are not due to the inherent economics of the restaurant industry” but rather to “the power and influence of the restaurant lobby,” she said.The U.S. House of Representatives recently passed legislation gradually eliminating the subminimum wage, an effort Jayaraman said was led by conservative Democrats. “ Chicago can certainly do this,” she said.