Chicago City Council Approves Two-Year Pause on the Elimination of the Tip Credit
On Wednesday, May 20, 2026, the Chicago City Council approved a compromise that pauses the city’s planned elimination of the tip credit for at least two years. At the time of the vote, Chicago’s standard minimum wage was $16.60 per hour, while the tipped minimum wage remained at $12.62 per hour, with the gap historically supplemented by tips. This approximate 24% gap between the two wage rates will now remain in place for the near future. Approved by a 49-1 vote, the ordinance follows years of political disagreement between Mayor Brandon Johnson and the City Council regarding the future of Chicago’s tipped wage system. For instance, previous efforts to preserve the City’s 2023 tipped wage phaseout plan were vetoed by Mayor Johnson despite receiving City Council approval in a 30-18 vote. Today, the Council’s strong 49-1 majority exceeds the threshold necessary to override a veto, allowing it the opportunity to do so if Mayor Johnson again decides to formally oppose the restaurant-friendly proposal.
This new ordinance delays Chicago’s planned transition away from the tipped wage structure, allowing restaurants to continue applying the tip credit for at least two additional years before scheduled increases resume. According to Illinois Restaurant Association President and CEO Sam Toia, this ordinance preserves the existing relationship between Chicago’s standard and tipped minimum wages rather than permanently locking the tipped wage at a fixed dollar amount. As a result, restaurants are expected to continue adjusting to the ordinary cost of inflation while avoiding more significant increases that would have moved wages closer to the standard minimum wage under the 2023 plan.
Before the vote, Chicago’s plan was for restaurants to pay tipped workers closer to the full minimum wage directly, gradually reducing reliance on the tip credit. This plan presented a significant threat to restaurants by requiring higher payroll costs and, in turn, creating pressure to raise menu prices or cut staff hours. The compromise recently approved by the City Council provides employers with additional time to adapt to rising labor expenses, now that the previously scheduled tip credit reduction has been delayed.
Opponents, including Alderman Jessie Fuentes, who introduced the One Fair Wage Ordinance, continue to support the original phaseout timeline and argue that delaying implementation may shift excessive financial risk onto tipped employees, particularly in communities already experiencing rising living costs. Supporters of the phaseout contend that forcing workers to rely on tips may create unfair income variability and deprive them of higher guaranteed hourly wages. Their argument is essentially that, because tips can fluctuate, increasing direct wages would create greater stability for workers who rely heavily on them.
On the other hand, the Council’s vote represents a meaningful victory for Illinois restaurants, particularly given the broad consensus reached on an issue that has been politically divisive in recent years. Similar efforts continue at the state level, where the Illinois Restaurant Association (IRA) has advocated for preserving the tip credit and supported policies affecting restaurant operations and labor costs. The IRA has credited continued member support by helping ensure that the industry maintains a strong voice at City Hall, in Springfield, and in other forums where decisions affecting restaurant businesses are made.
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