Memo for fiscal year 2019, updated 2018-04-10

[Archived] Question #56: What would it cost to extend the living wage ordinance to include capital project contractors?


What would it cost to extend the living wage ordinance to include capital project contractors?


The City’s Living Wage ordinance when written in 2010 intentionally did not extend living wage requirements to capital project or construction services contracts. The Living Wage was established in June 2000 (took effect FY 2001) with the expressed intent to help low-wage workers on certain City service contracts so that they could better provide for themselves and their families. The categories of contracts included under the policy cover the employees who would generally be earning lower wages in the marketplace. While there are certainly exceptions, most construction contracts and capital project contracts awarded by the City would pay wages above the currently established living wage.

Living Wage contracts require the contractors to track the wages and hours worked of all employees working under the contract and report it back to the City on a quarterly basis. To ensure compliance, this tracking and reporting activity is required of all contractors regardless of whether all their employees are paid wages above the Living Wage floor. Adding additional contracts to this requirement represents a potentially significant workload increase for both the contractors and City staff.

As the City does not have wage data for most capital project and construction services contracts, it is not possible to forecast the fiscal impact an expansion of the Living Wage would have on the City. We do not believe there are a significant number of wage earners that would be directly impacted by a Living Wage policy, which would theoretically limit the fiscal impact. However, the additional administrative costs on the contractors and their subcontractors of tracking and reporting wage data would certainly be estimated and passed through to the City, or contractors might choose to not bid on City contracts due to reporting requirements. So the total fiscal impact might be more significant.

One additional complication relates to construction contracts that utilize federal funding. These contracts (over $2,000) are already subject to Davis-Bacon and Related Acts and have existing wage requirements for contractors and subcontractors which would conflict with the City’s Living Wage. In order to receive the federal funding, the City would have to follow Davis-Bacon wage rules and forego our Living Wage requirement. The percentage of construction contracts receiving federal funding varies significantly from year-to-year.  

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