(Reuters) - Chicago's minimum wage would rise to $13 an hour from $8.25 by 2018 under a proposal announced on Tuesday by a panel that Mayor Rahm Emanuel appointed to chart a path for raising the wage floor in the nation's third largest city.
The proposal, which would be phased in over four years, would affect about 410,000 workers in the city and add $800 million to the Chicago economy, the panel said.
The panel recommended waiting to act on its proposal until Illinois residents vote in an advisory referendum in November about a proposed state minimum wage hike and state lawmakers have an opportunity to address the minimum wage later in 2014.
Emanuel said he supported the proposal.
"When people hold a job and do the work, they deserve to live better than to live in poverty and now we can take that next step towards making sure that every working Chicagoan has a shot at the middle class," Emanuel said in a statement.
Fourteen members on the panel of aldermen, labor and business leaders supported the recommendations and three were opposed, including the Chicagoland Chamber of Commerce.
"We don't think it is wise at this point to raise the minimum wage and in doing so it potentially could do more harm than good to the local economy," said John Carpenter, the chamber's vice president of external affairs.
Carpenter said Illinois lagged the country in recovery from the recession and that its minimum wage of $8.25 an hour was already $1 higher than that of neighboring states.
The minimum wage for workers who receive tips would rise by $1 over two years from the current $4.95. The minimum wage would be indexed to inflation after four years and some existing exemptions would be retained.
The recommendations follow a separate proposal from a group of Chicago aldermen to raise the minimum wage to $15 an hour, which would match wages approved in Seattle approved in June.
Several states have approved increases in minimum wages this year, including Michigan and Minnesota.
President Barack Obama has urged an increase in the federal minimum wage to $10.10 an hour from $7.25, but the proposal has by stymied by opponents in Congress who say it would kill jobs.
Reporting by David Bailey in Minneapolis; Editing by Peter Cooney