Gov. Andrew M. Cuomo wants to change the state’s prevailing wage mandate, expanding its requirements to include contractors doing work on projects receiving state funds. But critics said the change could raise construction labor costs by an estimated 20 percent and put a damper on development.

The prevailing wage in Western New York is set by the State Department of Labor. It varies by job position and location, but usually mirrors the pay scale in collective bargaining agreements negotiated by trade unions.

Contractors are already required to pay the prevailing wage on public works projects. But Cuomo said in his State of the State address Tuesday that he wants to expand the public works definition to include private-sector projects assisted by tax breaks from industrial development agencies.

The Buffalo-Niagara Partnership was among 18 business groups that sent a letter to the governor last March asking him not to expand the prevailing wage requirements. Calling the mandate “already flawed and miscalculated,” it said the change would hurt smaller community-based projects that are driven by private dollars. Those projects break even at their current wage rates and increasing costs would “make many of them financially unfeasible,” the groups said.

“For most projects, such a drastic increase in total project cost dwarfs the incentives and economic benefits bestowed,” the letter said.

The letter pointed to a report from the Empire Center for Public Policy, a fiscally conservative think tank, which compared the prevailing wage to the regional medians of occupational wages for all non-residential building construction workers, including those paid union scale. It found the prevailing wage increased construction labor costs by 20 percent in the Buffalo region.

Unshackle Upstate, a business advocacy group, said the prevailing wage expansion would “severely weaken our economy and hurt taxpayers.”

“The proposal to apply prevailing wage to all projects that receive state funding is a death sentence for upstate economic development initiatives. Under this mandate, efforts to fix our crumbling infrastructure would be far too expensive to pursue,” the group said in a statement.

The National Federation of Independent Business, a small business association, said expanding the mandate would harm small businesses.

“NFIB and our members remain concerned that some proposed employer mandates contained in the Governor’s address appear to embrace a flawed, one-size-fits-all regulatory model that severely limits the autonomy and flexibility small businesses need to attract talent and remain competitive,” Greg Biryla, the group’s New York State director, said in a statement.