Restaurants in Chicago are preparing to stomach a new law that will require them to pay their waitstaff the city’s minimum wage, but some say the cost will be passed on to customers via menu price hikes.
A proposal will likely be advanced by city lawmakers as soon as Wednesday, after which it will head to the desk of progressive Mayor Brandon Johnson who has said he will sign the law.
Should the law take effect, it will require restaurants to phase out the tipped minimum wage over a period of five years until it reaches Chicago’s standard hourly minimum wage of $15.80.
The proposed ordinance comes as the result of negotiations between the Illinois Restaurant Association and activists who have long been fighting to abolish the tipped minimum wage, which is $9.48 plus gratuities.
Activists argued that the current tipping system is outdated and too dependent upon the mood of diners. Furthermore, they believe owners can afford to pay their workers higher wages.
In Illinois, restaurant and other business owners are allowed to pay their workers below the minimum wage if the tips they receive make up the difference.
The Chicago City Council will likely vote Wednesday on an ordinance to require restaurant owners to page their waitstaff the full minimum wage, instead of a lower number supplemented by tips
A Farm Bar bartender mixes up a cocktail. After the new law passes, beginning in July, servers will make a higher hourly wage, but patrons may feel inclined to tip less if service charges and menu price hikes are put in place
About a third of restaurant owners in Illinois are already paying their waitstaff the state minimum wage, in addition to tips. But restaurant owners in Chicago are worried about the bottom line.
T.J. Callahan, a Chicago restauranteur told The Wall Street Journal that he ran an experiment back in April, after opening his newest restaurant.
Instead of giving customers the opportunity to tip, he added a 20 percent service charge to all checks in an effort to boost employees’ hourly pay.
He said it didn’t go well. His staff’s overall pay declined and sales at the restaurant fell. He said some customers vocally lamented the change and called the move ‘socialist.’
After five months of the experiment, Callahan switched back to the more standard tipping model.
‘Americans are used to this tipping model. They’ve been doing things this way for a long time,’ he told The Journal.
The conversation around tipping in the US has escalated in the last couple of years, as the COVID-19 pandemic upended the hospitality industry, and restaurants have begun shoving a credit card reader in your face at the end of a meal.
Owners say that continuing to change the system will upend their businesses, forcing them to raise menu prices and shrink the size of their staffs.
The pandemic and current inflation rate have led Callahan to increase prices at his restaurants close to 10 times in the last few years.
He said the coming change may force him to raise prices yet again at his Midwestern-themed Farm Bar restaurant, where soon a burger may cost $20.
Most restaurants operate on the margins of profitability and owners say raising the amount they pay their servers may lead to fewer servers being employed
Chicago restauranteur TJ Callahan said he experimentally imposed a 20 percent service charge and took away tipping at one of his restaurants. The servers made less money and customers didn’t like it
Callahan says he will likely have to raise the price of many dishes at his restaurants
Activists and servers found a captive audience for their effort in progressive Mayor Brendan Johnson, who said he would sign the ordinance if it came across his desk
Tipping culture in the US has become gradually more convoluted since COVID, and since restaurants have begun using credit card readers instead of delivering checks
The cost of labor increase, said Callahan, will likely prompt him to raise his menu prices by 50 cents or a dollar per item. He also said that he may eliminate some server positions and have more customers order through QR codes.
Despite price hikes, many full service restaurants say that new costs have still not fully accounted for increases in the cost of labor, food, and other business expenses.
An August survey conducted by the Illinois Restaurant Association found that 80 percent of 315 restaurant owners say they plan to raise menu prices if the city’s tip system changes.
Forty percent of owners said they would introduce new fees on bills or implement an automatic service charge.
Some City Council members voiced opposition to the ordinance in September when they said it’s not clear that eliminating standard tipping is what diners want, nor is it a change that is obviously needed.
But Mayor Johnson is enthusiastic about the effort and in the negotiation with the restaurant owners, activists found themselves with the better hand to play.
Once passed, the new Chicago law will go into effect next July.
Source: | This article originally belongs to Dailymail.co.uk