City Administrator Robert C. Bobb yesterday backed away from a plan to compel a broad swath of District businesses to pay their workers at least $9.25 an hour, saying Target, Costco and other retail establishments should not be required to pay a city-ordained "living wage."

Under pressure from local business leaders, Bobb said the administration would modify Mayor Anthony A. Williams's original living-wage proposal. That measure called for employers who benefit from city funds -- including tenants of publicly financed buildings and shopping centers -- to pay their workers $10.50 an hour for jobs without health insurance or $9.25 for jobs with benefits, a significant increase over the city's current $6.60 minimum wage.

Under the new proposal, Bobb said, only the District government, city contractors and developers who benefit directly from city-backed economic incentives would be required to pay the higher wages. Nonprofit organizations, part-time employees and students also would be exempt.

Labor advocates condemned the changes, accusing the Williams administration of giving up one of the most important pieces of its living-wage plan. City contractors and the D.C. government already pay the vast majority of workers more than $10.50 an hour, they said.

Retailers, on the other hand, "are one of the largest sources of low-wage jobs in the District," said Ed Lazere, executive director of the D.C. Fiscal Policy Institute. "To take that off the table when you're talking about jobs for D.C. residents almost defeats the purpose of the bill."

But city business leaders said a living-wage requirement would shut down many smaller retailers, which typically pay market rent for space even in publicly financed buildings. Bobb, meanwhile, said the changes are necessary to ensure that chain stores don't have to pay workers differently depending on the location of the store.

"We are really involved in a delicate balancing act," he said.

Bobb announced the changes in testimony before the D.C. Council's Government Operations Committee, which was considering a package of initiatives introduced this year by Williams (D) to combat chronic unemployment. Though the city is home to more than 672,000 jobs, only about 200,000 of them are held by District residents. The city's unemployment rate stood at 7.7 percent in April, well above the national average of 5.2 percent. In some neighborhoods, Bobb said, the unemployment rate tops 30 percent.

In addition to creating a living wage, the mayor is proposing to require employers who benefit from city funds, including retailers, to ensure that 51 percent of new hires are D.C. residents. His "Way to Work" initiative also would call on some employers to pay deposits of up to $200,000 to ensure compliance. And it would force any employer who benefits from special economic development incentives to contribute to a "job opportunities bank" to fund job-training programs.

Business leaders have applauded the goals of the initiative but said it would heap more fees and regulations on a business community that already is heavily taxed while doing little to solve the problem. Laws requiring employers to hire D.C. residents, for example, create little but paperwork "if we don't have [qualified] people to fill the jobs," said Robert A. Peck, president of the Greater Washington Board of Trade.

Business leaders also are skeptical of job-training programs that do not focus on specific skills needed to qualify for positions in construction, hospitality and other booming sectors of the local economy. Peck, D.C. Chamber of Commerce President Barbara Lang and others have called on the mayor to name a special commission to craft strategies for preparing D.C. residents for jobs that actually exist.

Yesterday, Bobb said the mayor, who was traveling in China, had agreed to appoint such a commission. Vincent B. Orange Sr. (D-Ward 5), the Government Operations Committee chairman, said he would push the Way to Work legislation forward but wait for the commission's findings before making final changes.