We’ve seen this movie before. Cities raise wages with good intentions, jobs quietly disappear, and workers are left with fewer opportunities. Now Chicago is following the same script and new EPI analysis shows that their ending may be just as bleak.
In 2023, lawmakers passed a bill to phase out Chicago’s tip credit over five years. The second increase just took effect, and early signs are already raising concerns. Iconic restaurants like Gale Street Inn are closing their doors, and full-service restaurant employment growth has stalled. However, this isn’t the first time Chicago has tried to boost wages in ways that backfired. To understand where the city might be headed, it’s worth looking back at their history of wage increases over the past 10 years.
Chicago began raising its minimum wage in 2015, from $8.25 up to $13 by 2019, and set to increase every year after. Now it’s up to $16.60 per hour.
For years, the tipped wage in Chicago has been raised based on inflation. Now the city has signed a “One Fair Wage” ordinance which has already begun eliminating the difference between the tipped wage and the regular minimum wage. As a result, Chicago’s tip credit has gone from 45% in 2015 down to 24% in 2025.
As Chicago has slashed its tip credit over the last decade, the city’s restaurant industry has taken a hit. Best-available data on the city’s full-service restaurants shows annual full-service restaurant job growth stagnated – and turned to job losses in 2019. Following COVID and several years of recovery, Chicago’s restaurant jobs are still below 2019 levels – and declining.
Looking at year-over-year change, these employment consequences of Chicago’s slashed tip credit are clear.
Leading up to minimum and tipped wage hikes starting mid-2015, Chicago’s restaurant industry jobs were increasing anywhere from 2-4% every year. As yearly wage hikes and a shrinking tip credit began to take hold, restaurant employment went from thriving to declining – losing over 1,000 jobs in 2018 and 2019.
After some bouncebacks after COVID in 2020, Chicago is still not back to pre-pandemic restaurant employment levels. On top of that, last year the city’s employment started to fall again.
These impacts are not surprising: economists studying decades of state and local wage hikes have found that raising tipped wages causes job and earnings losses for tipped employees.
Rising minimum wages and a shrinking tip credit over the last decade already set Chicago’s restaurants up for failure. Then, the city enacted a tip credit elimination law starting in July 2024, which has continued restaurants’ decline and blocked the city’s path to full job recovery following the pandemic.
These early trends should be a warning sign: Chicago’s tip credit elimination law is the latest bad policy hurting restaurants and their employees.