Illinois lawmakers are trying again to push tip credit elimination for the entire state. Following the City of Chicago’s experiment with tip credit elimination that has already caused job losses and a rise in service charges, state lawmakers abandoned following suit with HB 5435 last year. Now some lawmakers are back with a similar proposal.
Yet new data from the U.S. Bureau of Labor Statistics shows a cautionary tale: Chicago’s tip credit elimination has already slashed jobs in the Windy City in less than a year.
Earlier this month, EPI’s research director Rebekah Paxton submitted testimony on newly-introduced House Bill 2982 — another attempt to eliminate the Illinois tip credit by 2027. The testimony explores the economic research warning against the consequences of upending the base wage plus tips system, and looks at how similar policies have played out in other areas — including most recently in Chicago.
Chicago began eliminating its tip credit in 2024, with a hike in the tipped minimum wage from $9.48 an hour to $11.02 an hour — on its way to reaching the regular minimum wage by 2027. Early data indicates negative impacts on Chicago’s restaurant jobs: the latest federal data surveying 95% of employers through September 2024 found Chicago’s metropolitan area lost over 5,000 restaurant jobs in just three months since the city’s tip credit elimination policy began to take effect in July 2024.
The Chicago-area job loss, which represents 3.3% of its full-service restaurant workforce, is more than seven times greater than losses for full-service restaurants throughout the rest of Illinois (which lost 0.45% of jobs in the same three-month period).
Full-service restaurant job losses since tip credit elimination began have also significantly outpaced the rate of job losses for all industries in Chicago (0.52% employment loss) during the same three-month period.
Chicago has also seen a rise in automatic service charges as restaurants are forced to adapt to afford higher wage bills. Local diners have tracked over 150 restaurants in Chicago to date that have added these fees.
These consequences are why 87% of Illinois tipped workers oppose changes to the existing tip credit system. Tip credit elimination isn’t an experiment Illinois lawmakers should bring statewide.