AUSTIN (KXAN) — Austin City Council approved a $20 hourly living wage as part of the fiscal year 2022-23 budget. The budget passed officially late Thursday.

Currently, Austin City Council has a minimum wage of $15 an hour for city employees. City Manager Spencer Cronk had proposed a living wage increase from $15 an hour to $18 an hour. Council members bumped that to $20 with a goal of $22 in the future.

Read more about what the overall budget covers here.

Employees to get a $20 hourly living wage

On Thursday, Council Member Vanessa Fuentes highlighted similar efforts being considered by Travis County, which is also considering a wage increase to a minimum $20 an hour for county employees.

The move to a $20 base hourly wage for the lowest paid city employees marks a 33% increase over their current $15 hourly rate, per city documents. The proposed initiative is estimated to cost between $5.5 million and $10.7 million in the general fund; Joya Hayes, the city’s human resources director, provided an estimate this week that the cost will possibly land around $7 million.

“Fortunately, given the growth that we’ve had in this city, this will not have an impact on the homeowner’s property tax bill. So very pleasantly thrilled that we’re able to deliver a lower property tax bill and deliver higher wages for employees,” Fuentes told KXAN.

The move marks a step closer to the previously identified $22 an hour desired living wage, or the lowest wage deemed necessary and optimal to cover all living cost requirements. Approximately 5,000 employees — regular, sworn and temporary — are paid below $22 an hour.

“That’s a huge pay increase for these employees who desperately need it, who have been on the front lines, during the storm, during COVID,” said Carol Guthrie, the business manager for AFSCME Local 1624, which represents Austin employees.

In addition to a new living wage, council also have factored in a 4% across-the-board increase for city employees, along with a $1,500 cost stipend.

“These positions matter and it’s important that we take this action today and raise the wage,” Fuentes said.

Addressing resulting compression costs

As part of the discussion, council addressed possible compression costs that could come from this living wage increase. City staff defined compression as the following scenarios:

• Minimal pay difference between employees and supervisors
• Minimum wage increase leads to pay scales being impacted and pay levels converging
• Market rate of a job increases, and “employers bring in new employees close to or higher than what the manager earns”
• Market rate for starting salaries begins increasing at a faster rate than an entity can afford to give raises to current employees

Fuentes, along with Council Members Alison Alter, Ann Kitchen, Leslie Pool and Austin Mayor Steve Adler also requested the addition of a mid-year budget amendment consideration if additional funds are needed due to compression impacts.

Hayes said all pay raises will go into effect at the start of the fiscal year on Oct. 1. She said she will then work with individual departments on resulting compression issues and, if there’s a need for additional funds to finish out the second half of the fiscal year, that will be discussed in the mid-year budget amendment consideration.

Hayes said so long as the city has adequate funding to address compression issues in addition to the living wage increase, she will work with department heads to address those concerns as they arise. She said she doesn’t have the authority to spend funds not available, and will regroup with council mid-year for any funding needs, if identified.

Hayes added other funding issues can be addressed through other measures, like holding certain vacancies longer, until council can consider a potential mid-year budget amendment.