ALBANY – Governor Pataki yesterday vetoed a $2 increase in New York’s minimum wage, setting up a bitter override battle in the Legislature.

Siding with business interests against labor unions, Mr. Pataki rejected the wage hike overwhelmingly approved by lawmakers last week, which would raise the minimum to $7.15 an hour by January 2007.

The Republican governor warned that the change would drive entry-level jobs to New Jersey and other states that continue using the federally mandated minimum of $5.15.

The Democratic speaker of the Assembly, Sheldon Silver, immediately said he would seek an override when his members return to Albany next week, calling the veto “an outrageous slap in the face to thousands of hardworking men and women.”

The response from the Republican Senate majority leader, Joseph Bruno, was noncommittal, saying the Senate would “review” the governor’s message but is primarily focused on completing the belated state budget.

The wage hike passed 116-19 in the Assembly and 51-7 in the Senate, suggesting both houses could easily muster the two-thirds majorities needed for an override.

The governor’s action, far from resolving the issue, ignites a renewed struggle between labor unions that favor the wage hike and business interests that oppose it.

Proponents of a higher minimum wage, including the AFL-CIO and the Catholic Conference, said the raise would fight poverty by directly putting money into the pockets of about 700,000 low-income workers across the state and indirectly boosting pay for hundreds of thousands of others.

Opponents, including the Business Council of New York State and the Manhattan Chamber of Commerce, argued the hike would force small businesses to lay off employees and weaken the state’s overall business climate – ultimately doing more harm than good for the working poor.

A report released this month by the Employment Policies Institute, an employer-backed think tank, found that the higher minimum wage would cost businesses $880 million a year, with much of that money flowing to teenagers with part-time jobs and others living above the poverty line.

The president of the Manhattan chamber, Nancy Ploeger, said she was “very happy” with the governor’s decision.

“It sends a very clear message to employers and businesses moving to the state that we are going to remain a competitive state,” she said. “It’s not going to be in anyone’s best interest to lose jobs and to lose companies from the state.”

The president of the AFL-CIO of New York State, Denis Hughes, called it “a sad day for all working men and women.”

“If we are to consider ourselves a progressive, enlightened society, then we must protect the neediest among us,” Mr. Hughes said. “The New York State AFL-CIO will not rest until the minimum wage in this state is raised to a fair and equitable standard.”

In his veto message, Mr. Pataki – who has approved labor-friendly legislation in the past – came down on the side of business interests.

“New York has to continue fighting for every job, and we cannot unilaterally put this state at a competitive disadvantage,” he said. “I cannot support a bill that will hurt our efforts to fight for every New York job and every New York family.”

Mr. Pataki reiterated his support for a minimum wage hike at the federal level, especially one targeted at fulltime workers. He went so far as to release a letter from his budget director, Carole Stone, to the 31 members of New York’s congressional delegation urging them “to address this important issue without further delay.”

The veto puts Mr. Bruno in a tricky political situation. When he abruptly dropped his opposition to the wage hike this month, it was widely seen as an effort to protect Republican Senate candidates from union attacks during the fall elections.

The maneuver cost Mr. Bruno and his deputy majority leader, Senator Dean Skelos of Long Island, their traditional endorsements by the Conservative Party. Now he will come under pressure to consider an override that would further alienate conservatives, business interests, and a governor from his own party.

City Council Member Jose Serrano, a Democrat seeking to challenge Republican Senator Olga Mendez of Manhattan, immediately seized the issue.

“The governor’s veto is yet another example of the need for real leadership in Albany that will stand up to the Republican Party – not with them,” Mr. Serrano said in a statement yesterday.

Some see political ramifications for the governor as well. A Democratic senator from Jackson Heights, John Sabini, portrayed the veto as Mr. Pataki’s way of burnishing his conservative credentials as he prepares to host the Republican National Convention in New York City beginning in late August.

“It seems to me the governor is trying to impress the arriving delegates rather than the New Yorkers who are here already,” Mr. Sabini said. “He’s trying to impress the folks who will determine his next landing place.”

The Conservative Party chairman, Michael Long of Brooklyn, praised Mr. Pataki for his “courageous stand.”