ALBANY — Advocates for low-paid workers and business groups are poised for a major clash over a proposal that would significantly boost the minimum wage throughout the state.

In the upstate region, the minimum wage is already set to rise to $14.20 Dec. 31. That’s a dollar more per hour than the current wage floor.

The federal minimum wage has remained at $7.25 per hour since 2009.

Legislation with Democratic sponsors in both the state Senate and Assembly would increase the minimum wage to $20 per hour by 2026 and use a cost of living indexing to set the wage going forward.

Ashley Ranslow, director of the New York arm of the National Federation of Independent Business, said the measure, if approved, would put many small businesses in jeopardy.

Not including the increase that becomes effective in just four weeks, the proposed legislation would boost the minimum pay by 42% over three years, Ranslow said.

“It’s our understanding and fear, frankly, that this is a legitimate threat heading into next year,” said Ranslow, who regularly lobbies state lawmakers and other state officials on behalf of the pro-business group.

Sen. Jessica Ramos, D-Queens, and other supporters of applying a cost of living adjustment to the minimum wage argue the current wage floor has been eroded by inflation and the spiraling cost of housing and energy.

Ramos states in her measure that approximately 1 million New York workers — about 16% of the workforce — are paid the minimum wage. Those workers are disproportionately women and people of color, groups that face barriers to advancement, the bill states.

A new coalition known as Raise Up NY, made up of labor unions, community organizations and others, has begun applying pressure to lawmakers and Gov. Kathy Hochul to support the measure.

Michael Kink, executive director of Strong Economy for All, a labor-backed progressive advocacy group, said raising the minimum wage in yearly intervals will have beneficial impacts throughout the state economy.

“It will drive money into local economies” while making the state more affordable for workers earning the lowest wages, Kink said.

He also said polling released earlier this year by Data for Progress, a progressive think tank, found the majority of New Yorkers support further increases in the minimum wage.

“With all-time high corporate profits, it’s something that businesses can afford, and should be able to provide to their workers,” Kink said: “And if they don’t, we need to make them do it.”

But opponents of the bill say workers aren’t the only ones negatively impacted by inflation and its consequences.

“This is a time when small businesses are dealing with 40-year high inflation, supply chain issues, labor shortages, high gas prices, rising utility rates, and increases in unemployment insurance taxes,” Ranslow said. “For many small business owners, this would be a nail in the coffin.”

Assemblywoman Latoya Joyner, D-the Bronx, is carrying the bill in the lower chamber.

Hochul is slated to release her proposed state budget next month. The spending plan usually outlines the governor’s fiscal agenda for the year.

She has not yet taken a firm position on further increases in the state minimum wage, telling New York City television station WNYW last month: “Overall, we don’t want to have any harder hit on the businesses, especially the small businesses, that are struggling,” Hochul said. “But it’s something I’m willing to have a conversation about.”