I couldn’t find an answer based on the same problem I’m having with Figma now:
When I try to create an auto layout with different elements (for example a button), it doesn’t group it based on the largest element but align them one by one…
If you want the text be inside paper, You have put that text inside the component of Paper
and adjust auto layout to the component
If you want the frame you made to have the same behavior, you need to apply those effects and fills to the frame and the only content inside auto layout frame is the text
In simple word, Auto layout only gives you the ability to order things of a group not grouping them.
Your hands is open to do anything with auto layout, If the right setting implement on it