IL House Bill 5345 may raise wages for tipped workers to the state minimum, potentially affecting consumer tipping habits and business costs.
October 2, 2024
IL House Bill 5345 may raise wages for tipped workers to the state minimum, potentially affecting consumer tipping habits and business costs.
Tipping service workers is common in the United States, particularly for restaurant servers and bartenders. Leaving the standard 10% to 20% tip is second nature for many Americans, who factor this cost into their spending on a night out. A new bill in the Illinois House of Representatives contemplates upending the tipping system as we know it. House Bill 5345 would amend the Minimum Wage Law by providing that tipped workers would instead earn the State’s minimum wage or a higher wage if their local ordinances set a higher wage than the state.
Local governments can set their own wages if they are home-rule municipalities, as long as those wage amounts are higher than the minimum set by the state. The Illinois Constitution provides that municipalities with home rule status are allowed to exercise any power and perform any function unless they are specifically prohibited from doing so by state law. The purpose of home rule is to allow local governments to come up with their own, locally focused solutions to their individual problems.
The current minimum wage in Illinois is $14 per hour. According to Illinois labor laws, employers where employees receive gratuities from customers are allowed to pay only 60% of the state minimum wage to those employees. Therefore, workers such as servers and bartenders in bars and restaurants, whose earnings include tips, are paid a wage of $8.40 an hour. Due to this, most of these employees rely on tips to boost their income.
This is fairly common knowledge. However, according to WGN news, employers must make up the difference if an employee’s tips are not sufficient to raise the minimum wage. In this regard, tipped workers should theoretically always earn at least the minimum wage, but they often earn far more, depending on how busy and lucrative the establishments they work at are.
Some tipped workers are concerned that if this bill becomes law, they will end up actually earning less because restaurant and bar patrons will be less inclined to leave generous tips, or any tips at all, knowing that the workers technically get paid on par with the state minimum wage laws.
Others believe raising their wages to be in line with the current minimum wage would provide them with a steadier income and attract more employees. Illinois State Senator Mike Halpin added that the bill would also attract employees at a higher skill level, allowing employers to choose the most qualified workers.
Some restaurant owners have voiced concern about the viability of their businesses if this bill passes. The Executive Secretary for the Illinois Licensed Beverage Association, Connie Cornmesser, believes this bill would cause chaos for employers and employees. The bill could cause potentially serious economic problems for employers and upend their businesses. Cornmesser pointed out that the difference between what tipped employees are being paid now and what they stand to get paid if this bill passes will come out of consumer pockets because the prices of the products and services of the establishments will inherently have to go up due to the higher cost of doing business.
The director of the Hospitality Business Association of Chicago, Pat Doerr, has also pointed out that the hospitality industry has not yet recovered from the pandemic and that inflation has also caused a strain. It would take some time for the industry to fully get back on its feet. One potential way to make the increase more feasible is to tie it to current inflation rates and provide a cushion for employers via various tax relief opportunities tied to other state government programs.
Senator Halpin and others hope the legislature will take a slow approach to find the proper balance between the various interests involved. Consumers often shoulder the cost of such increases, but there may be creative ways to approach this issue if the legislature takes some time to work through the potential issues.
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