2018-166 Living Wage for City ContractorsDate: November 16, 2018 Report No. 2018-166
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Research related to requiring City contractors to pay their employees a living wage.
EXECUTIVE SUMMARY:
Texas law allows for cities to adopt requirements for city contractors to pay a living wage and
there are a number of cities in Texas that have passed resolutions. These cities have different living
wage rates and indexes that are used to calculate the living wage. If City Council decides to proceed
this direction, consideration will need to be given to a potential reduction in competition in the
solicitation process and staff time required for administration.
BACKGROUND:
A request was made on September 25, 2018 by Council Member Armintor to provide research on
other municipalities requiring City contractors to pay their employees a living wage. Generally, a
living wage is defined as the minimum income required for workers to meet their basic needs
including shelter, clothes, and food. Texas Labor Code 62.0515 allows municipalities to set
minimum wages for their employees and impose minimum wage requirements on contractors hired
by the City. Texas Law does not allow cities to set a city-wide wage that is higher than the federal
minimum wage.
Table 1 includes the Texas cities staff has identified as having adopted legislation related to a
living wage. Living wage levels vary by area and are impacted by the cost of living in that area.
Cities have different rationale as the basis for setting their living wage legislation. The City of
Dallas uses the Massachusetts Institute of Technology’s Living Wage Calculator, the City of
Austin’s wage level has incrementally increased since originally enacted in 2008, and the City of
El Paso’s wage level was set after the city council’s discussion of the budget impact of the increase.
The living wage regulations in these areas also vary in the individuals provided a living wage.
City Individuals Covered Current Rate
Dallas City Contractors, City
Employees
$11.15
Austin City Contractors, City
Employees, Chap. 380
Businesses
$15.00
San Antonio City Employees $14.25
San Marcos Business receiving economic
development incentives
$15.00
El Paso City Employees $10.00
Table 1. Texas Cities Living Wage Levels
Date: November 16, 2018 Report No. 2018-166
The cities studied enacted living wage legislation to promote an acceptable standard of living and
ensure workers were able to meet their basic needs, and determined that most contractors paid their
workers at or near the minimum wage. The cities cited studies that indicated employees paid at or
near minimum wage affected the quality of their work, and increased turnover and they believed
increased compensation would improve the level and quality of services provided to the city.
Table 2 describes the MIT’s living wage hourly rate for different family demographics in Denton
County. These range from $3.90 to $19.36 per hour above the federal minimum wage set at $7.25
per hour.
# of Adults 1 1 1 2* 2* 2 2
# of Children 0 1 2 1 2 1 2
Living Wage $11.15 $23.54 $26.61 $22.19 $25.04 $12.60 $14.78
Table 2. Denton County MIT Living Wage Calculations
*Only one working adult in the family.
DISCUSSION:
City Council does have the ability to set a policy to raise the minimum wage to a living wage for
City employees, city contractors’ employees, and/or development incentive recipients.
Table 3 describes the minimum impact to the budget if the wages of City employees were
increased to the MIT Living Wage level for a single individual with no children and two working
parents with a single child. Most employees impacted by this change would be Parks Recreation
staff and interns throughout the City. If City Council decided to proceed, further analysis would
be necessary to determine if additional adjustments would be required to ensure fairness between
the positions at or near the hourly wage.
# of Adults 1 2
# of Children 0 1
Living Wage $11.15 $12.60
No. of Employees Impacted 145 177
Salary Equity Adjustment $166,543 $362,479
Table 3. City Employee Living Wage Impact
Some considerations for the implementation of a resolution to require city contractors to pay a
living wage, including:
The requirement may limit competition due to increased labor cost and those cost increases
are passed along to citizens. The City of Dallas estimates the resolution increased the cost
of awarded contracts by $3.1 million in the year following adoption.
The increased burden on contractors for record-keeping and compliance may discourage
potential vendors from competing. For example, Dallas requires an annual report be
provided by the contractor showing they have complied with the city’s requirement and the
city can audit contractors as well.
Date: November 16, 2018 Report No. 2018-166
There would be increased staff time in auditing the records provided to ensure the
contractors comply.
Without a requirement for contractors to hire locally, the benefits of increased wages may
not be Denton residents.
Generally, cities adopting these resolutions have a larger population than Denton both in
Texas and nationally.
This topic will be included in a future Work Session strategy session with City Council if further
policy discussion or research is requested.
ATTACHMENT(S):
1. City of Dallas Resolution
2. City of Austin Resolutions
STAFF CONTACT:
Cassey Ogden
Director of Compliance
(940)349-7195
Cassandra.Ogden@cityofdenton.com
COUNCIL CHAMBER
152141
November 10,2015
WHEREAS,the City of Dallas is committed to promoting an acceptable standard of
living for working families and individuals in the City;and,
WHEREAS,the economic viability of such families and individuals in the City is
necessary to keep Dallas thriving with a strong workforce,healthy families,and
improved quality of life;and,
WHEREAS,the City awards many contracts to private firms to provide general services
to the public and to City government;and,
WHEREAS,the City has found that the procurement of general services contracts by
the City for services performed on City property or within the City of Dallas,such as
janitorial,grounds maintenance,mowing,and temporary labor,resulted in wage
payments by the service contractors to their employees that were at or just slightly
above the federal minimum wage;and,
WHEREAS,studies have shown that paying wage rates at or near the federal minimum
wage tends to inhibit the quantity and quality of services rendered by such employees;
and,
WHEREAS,economic studies have shown that paying wage rates at or near the federal
minimum wage fosters higher turnover,absenteeism and lackluster performance,while
paying a “living wage”has raised productivity and decreased turnover which improves
the quality of work provided and improves the overall quality of a project;and,
WHEREAS,a study by the Economic Policy Institute has shown that living wage laws
have small to moderate effects on municipal budgets;and,
WHEREAS,the City recognizes that the Massachusetts Institute of Technology Living
Wage Calculator for Dallas County,Texas,reflects that the current “living wage”for an
individual is $10.37 per hour;and,
WHEREAS,the City recognizes the benefits to the City when its general services
contractors provide employee compensation that will improve the level and quality of
services rendered to the City.
NOW,THEREFORE,
COUNCIL CHAMBER
152141
November 10,2015
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DALLAS:
Section 1.That the City Manager,or the Manager’s designee,is authorized and
directed to develop a procurement process with a wage floor on contracts awarded by
the City for general services performed on City property or within the City of Dallas
requiring contractors and subcontractors to pay their employees a “living wage”of no
less than the “living wage”rate for an individual (currently calculated at $10.37 per
hour),adjusted annually through use of the Massachusetts Institute of Technology
Living Wage Calculator,or its successor,for Dallas County,Texas,in order to obtain
increased work quality and better services to the City on such City contracts.
Section 2.That the City Manager,or the Manager’s designee,is further authorized
and directed to implement every fiscal year,without further city council action,the
annual “living wage”rate as determined by the Massachusetts Institute of Technology
Living Wage Calculator,or its successor,for Dallas County,Texas.
Section 3.That this resolution shall take effect immediately from and after its passage
in accordance with the provisions of the Charter of the City of Dallas,and it is
accordingly so resolved.
APPROVED BY
CiTY COUNCIL
.NOV 1 0 2015
-‘/&,r -
City Secretary________
RESOLUTION NO. 20141016-035
WHEREAS, the intent of providing a living wage is to ensure that
workers are able to meet their basic needs, which may be increasingly
difficult if their wages are stagnant as the cost of living continues to increase;
and
WHEREAS, the established living wage for the City has been $11.00 an
hour since 2008; and
WHEREAS, Council passed Resolution No. 20140612-067 which called
for a determination about the available options to tie the Uving wage to an index
to keep up with the rising cost of living in Austin; and
WHEREAS, as part of the Fiscal Year 2014-15 budget process. City
budget staff released a memo that stated there would be no fiscal impact for
raising the living wage from $11.00 to $11.39 an hour for city employees,
consistent with the 3.5% cost of living increase for non-sworn personnel; and
WHEREAS, during the Fiscal Year 2014-15 budget readings. Council
set the new living wage rate at $11.39 an hour for city employees; and
WHEREAS, amending the City's living wage policy to automatically
increase each fiscal year by a percentage consistent with the cost of living
increase for non-swom personnel provides a reliable and incremental increase in
the City's Uving wage, while having a minimal impact on the City budget; and
WHEREAS, the City has applied the Uving wage requirement to regular
employees. Purchasing Office contracts eUgible for Uving wage provisions, and
companies that enter into Chapter 380 economic development agreements with
the City for both construction workers and fuU-time employees; and
WHEREAS, any increases to the City's Uving wage rate wiU
automatically apply to future Chapter 380 agreements because the scoring matrix
states, "The Firm wiU ensure that all workers are paid at least the City of Austin's
living wage, including fiiU-time employees, contract en^loyees, and construction
workers hired for construction work funded by the Firm;" and
WHEREAS, the Uving wage provision of the City's Purchasing Office
Supplemental Purchase Provisions (Purchase Provisions) states that, "The City
requires Contractors submitting Offers on this Contract to provide a signed
certification with their Offer certifying that all employees directly assigned to
this City Contract wiU be paid a minimum living wage equal to or greater than
$11.00 per hour;" and
WHEREAS, the Uving wage provision of the Purchase Provisions should
be amended to reflect the City's current living wage rate of $11.39 an hour, and
wiU need to be amended annually to reflect the new Uving wage rate that results
from applying the cost of Uving index; and
WHEREAS, Resolution No. 20140612-067 caUed for a Uving wage study,
and the staff response to that resolution provided feedback about what other
pubUc entities provide as a Uvmg wage, but did not include an in depth analysis
of the cost of Uving in Austin or whether our current Uving wage rate is sufficient
to enable workers to meet their basic needs; and
WHEREAS, several community groups and labor organizations have
expressed concern about whether our Uving wage rate is sufficient, and have
expressed interest in participating in a comprehensive process that wiU analyze the
current cost of Uvmg in Austin and the impact to the City budget if the rate is
increased; and
WHEREAS, Dr. Paul Osterman is an economist and professor of Human
Resources and Management at the M.I.T. Sloan School of Management, has
authored several books on the importance of quaUty jobs, is considered a national
expert on Uving wage poUcies in the United States, and has expressed interest in
providing feedback during a stakeholder process as reconmiendations regarding
the City's Uving wage rate are formulated; and
WHEREAS, staff resources would help a stakeholder group determine any
fiscal impact of a change to this poUcy, how many City employees are under
certain wage rates, and potential impacts to City contracts; NOW,
THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CIIY OF AUSTIN:
A City Uving wage poUcy is estabUshed that ties the Uving wage to an
index consistent with the cost of Uving adjustment for non-swom personnel on
an annual basis during the budget process, and directs the City Manager to ensure
that the City's Purchasing Office Purchase Provisions are amended to reflect
the City's current Uvmg wage rate of $11.39 an hour for soUcitations issued after
tiie effective date of this Resolution, and shall be amended annuaUy to reflect the
new Uving wage rate that results from applying the cost of Uving index.
BE IT FURTHER RESOLVED:
The City Manager is directed to provide staff support for a stakeholder
process to develop recommendations regarding the City's living wage rate and
policy that should include representation from AFSCME Local 624, Austin
Interfaitii, Workers Defense Project, Laborers' International Union of North
America, IBEW Local Union 520, the Austin Chapter of the Associated General
Contractors, Plumbers & Pipefitters Local 286, the Greater Austin Chamber of
Conmierce, the Greater Austin Hispanic Chamber of Conamerce, tiie Greater
Austin Black Chamber of Commerce, the Greater Austin Asian Chamber of
Conmierce, the Austin Gay and Lesbian Chamber of Commerce, and other
interested stakeholders, and should seek input from Dr. Paul Osterman during the
process. The stakeholder group shaU provide an update regarding the process to
Council by December 11, 2014, and provide formal recommendations to City
Council no later than March 1, 2015.
ADOPTED: October 16 .2014 ATTEST:QVO AAAjc»ar A jirrxQcsLSLa
Jaimette S. GoodaU
City Clerk
RESOLUTION NO. 20150618-091
WHEREAS, the City Council adopted Resolution No. 20141016-035
establishing a Living Wage Task Force to make recommendations to the Council
on a range of living wage rates and indexes; and
WHEREAS, the City has established the minimum wage required for
contractor's employees as $11.39 per hour if those contractor's employees are
working on City property or City vehicles, and the contract is competitively
solicited by the City; and
WHEREAS, the Living Wage Task Force identified areas where the City's
minimum wage for contracts has not been applied, such as for non-construction
sub-contractors and construction contractors and sub-contractors, even if those
employees are working on City property or City vehicles; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF AUSTIN:
The City Manager shall provide policy options to the Economic Opportunity
Committee that would ensure the City's construction and non-construction
contractors and sub-contractors are included in the City's living wage policies if
their contracts are competitively solicited by the City and if the employees are
working on City property or City vehicles;
BE IT FURTHER RESOLVED THAT:
The City Council shall consider the fiscal impact of any such policy changes
during deliberations on the fiscal year 2015-2016 budget.
ADOPTED: June 18 ,2015 ATTEST:CW^ ^^ytA
0 Jannette S. Goodall
City Clerk
RESOLUTION NO. 20160324-020
WHEREAS, the City has established a minimum wage required for
employees of contractors doing business with the City; and
WHEREAS, Resolution No. 20150618-091 directed the City Manager to
provide policy options to the Economic Opportunity Committee to ensure the City's
construction and non-construction contractors and sub-contractors are included in
the City's living wage policies if their contracts are competitively solicited by the
City and if the employees are working on City property or City vehicles; and
WHEREAS, the Purchasing Officer provided living wage policy options at
the December 14, 2015 Economic Opportunity Committee meeting; and
WHEREAS, the Committee voted to move the policy options forward to the
City Council as recommendations for a living wage policy; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF AUSTIN:
The City adopts a Living Wage Policy for non-construction related
procurement solicitations as follows:
1. The City's living wage applies to contracts competitively and formally
solicited by the City, and subject to award by the City Council, except
as may be preempted by other applicable law or agreement;
2. The City's living wage applies to all work solicited to be performed on
City property or on City vehicles; and
3. The City's living wage applies to all prime contractors and all
subcontractors on a City contract.
BE IT FURTHER RESOLVED:
That the City Manager is directed to promulgate rules for the
implementation of the Living Wage Policy described herein to ensure the City's
minimum wage requirements are included in all solicitations subject to this
resolution after the effective date of this Resolution, except as may otherwise be
preempted.
ADOPTED: March 24 ,2016 ATTES
Jannette S. Goodall
City Clerk