In a recent article from the Wall Street Journal titled “McDonald’s Escalates Restaurant Industry’s Fight Over Tipping”, McDonald’s CEO Chris Kempczinski criticized the longstanding practice of paying tipped workers less than the federal minimum wage. He stated that all employees should be guaranteed at least the federal minimum wage, regardless of whether their wages are supplemented by customer tips.
As part of this stance, McDonald’s announced it will withdraw from the National Restaurant Association (NRA). The company argued that the tipped wage system gives casual dining restaurants a competitive advantage over quick service chains that pay full wages without relying on tips.
The article also noted that several states, including California and Washington, have already eliminated the tipped minimum wage, while cities like Chicago are phasing it out. Washington, D.C., had similar plans but has put those plans on a temporarily paused. McDonald’s also expressed support for eliminating federal taxes on tips, though Kempczinski acknowledged this would not affect McDonald’s employees since they are not tipped.
Labor advocacy groups such as One Fair Wage welcomed the announcement, calling the tipped wage system unfair because it shifts labor costs onto customers.
The National Restaurant Association’s Position
The National Restaurant Association continues to defend the tipped wage system and the tip credit. The group argues that the system benefits both restaurants and workers by keeping menu prices affordable while still allowing servers to earn well above minimum wage through tips. According to the NRA, many tipped employees earn a median of $27 per hour, and top earners can make more than $40 per hour.
Chicago’s Move to Eliminate the Tipped Wage
Chicago passed the One Fair Wage Ordinance in 2023, which began phasing out the tipped minimum wage in 2024 and will fully eliminate it by 2028. Under the new system, tipped employees will gradually earn the same minimum wage as non-tipped workers. The policy was introduced to create stability for workers whose income often fluctuates with customer tips.
By 2025, the city had already raised the tipped wage to more than $12 per hour, up from just over $11 the year prior. Supporters believe this change ensures fairness and reduces reliance on unpredictable income. Critics, however, warn that the policy could lead to higher menu prices, staffing cuts, or even restaurant closures.
Critics of the Tipped Wage System
Critics of the tipped wage model often point to :
- Income instability, noting that tips vary widely based on shift schedules, location, and customer demographics.
- They also raise equity concerns, citing studies that show women and people of color are more likely to experience wage disparities in tipped positions.
- Another concern frequently mentioned is tipping fatigue, as customers encounter tip requests more often across quick service, retail, and non-traditional tipping environments.
Supporters of the Tipped Wage System
Those who support keeping the system argue that :
- Earning potential for servers can far exceed minimum wage levels, especially in busy or high-end establishments.
- Business viability depends on the tip credit, which helps restaurants manage costs in a low-margin industry.
- Cultural value is tied to tipping in the United States, where customers view it as a way to directly reward service quality.
The Wall Street Journal article highlights how McDonald’s decision is fueling a larger national debate about the future of tipping and wage structures in the hospitality industry. With cities like Chicago moving toward change and the NRA defending the current system, the conversation over how workers are compensated is far from over.
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