Chicago, IL – Tipped workers across Chicago’s vibrant hospitality sector are set to receive the most substantial annual wage increase in the city’s history today, July 1, 2025, as the latest phase of the One Fair Wage ordinance officially takes effect. This pivotal step marks significant progress in Chicago’s commitment to phasing out the subminimum wage for these essential employees.
The base wage for tipped workers is increasing from $11.02 per hour to $12.62 per hour. This increment is paid by the employer, and employees earn this rate in addition to the tips they receive from customers. The move is a key component of the city’s broader plan, initiated by the One Fair Wage ordinance, to completely eliminate the subminimum wage system for tipped occupations by 2028.
Financial Impact and Economic Indicators
Advocates of the policy highlight its tangible financial benefits for workers. According to a recent report released by the organization One Fair Wage, tipped employees in Chicago have already seen substantial gains since the ordinance began its phased implementation last year. The report indicates that these workers have collectively received more than $137 million in new wages during this initial period.
Looking ahead, the economic impact is projected to grow significantly. The One Fair Wage report estimates that Chicago’s tipped workers are on track to earn an additional $235 million over the next five years as the ordinance continues to increase the base wage annually until it matches the standard minimum wage.
Moreover, the report suggests that the restaurant sector, often cited in debates about minimum wage policies, appears to be navigating the changes effectively and, by some measures, thriving. Since July 2024, the city has issued 856 new food establishment licenses, indicating continued growth and investment in the sector. Furthermore, the report noted a 50% reduction in food establishment license cancellations in 2024 compared to the previous year, 2023. This data point is presented as evidence that the wage increases have not triggered widespread business failures or closures within the industry.
Broader Income Trends and Demographic Impact
The effects of the One Fair Wage ordinance extend beyond the immediate base wage increase. Tipped workers across the wider Chicago metropolitan area have experienced a notable surge in overall income. The One Fair Wage report points to a remarkable 49% increase in total income for these workers, identifying it as the fastest growth observed in the nation.
Saru Jayaraman, President of One Fair Wage, underscored the social equity aspects of the policy. She highlighted that the workforce benefiting most significantly from this wage increase primarily consists of women and people of color. Jayaraman characterized the implementation of One Fair Wage not only as a measure of social justice but also as “smart economic policy,” arguing that increasing wages for these demographics injects capital into communities and stimulates local economies.
The Path to 2028
Today’s wage increase is the second step in a multi-year process. The One Fair Wage ordinance outlines a clear path for gradually raising the tipped minimum wage each year until it reaches parity with the city’s standard minimum wage by 2028. This phased approach is designed to allow businesses time to adapt to the changing labor cost structure while ensuring a more stable and predictable income floor for tipped employees.
Supporters argue that eliminating the subminimum wage will reduce reliance on tips, decrease wage instability, and improve working conditions for hundreds of thousands of hospitality workers. Critics, conversely, have voiced concerns about potential negative impacts on businesses, including increased operational costs and possible price increases for consumers, although the One Fair Wage report data on license issuance and cancellations aims to counter these concerns.
As Chicago progresses towards the full implementation of One Fair Wage in 2028, the city continues to serve as a focal point for the national debate surrounding minimum wage policies and the structure of compensation for tipped labor in the service industry.
