Gov. M. Jodi Rell vetoed legislationTuesday that would have raised Connecticut's minimum wage, sayingit would hurt businesses already facing economic challenges.

Rell's veto leaves the hourly rate at $7.65 for theapproximately 65,000 Connecticut residents earning the minimumwage. The last increase went into effect two years ago.

"Seeking an increase in the minimum wage is laudable, but it isa decision that cannot be made absent consideration of its impacton the state's economy," Rell wrote in her veto message toSecretary of the State Susan Bysiewicz.

"As leaders, we have to be cautious about mandating additionalcosts to be borne by Connecticut employers and must always becognizant of what is best for Connecticut, not only in the shortterm, but the long term," she said.

The legislation, passed largely along partly lines in theDemocratic-controlled legislature, would have raised the hourlyrate to $8 in 2009 and to $8.25 in 2010.

Of the approximately 65,000 state residents who earn minimumwage, about 47 percent are 24 years old and younger, according tothe state Labor Department. Many work part-time in retail, sales,cashier and food service jobs.

Messages seeking comment were left Tuesday for state SenatePresident Pro Tem Donald Williams, D-Brooklyn, one of the bill'sleading proponents; and the Connecticut Business and IndustryAssociation, which opposed it.

Rell cited a report by Bysiewicz that 2,752 Connecticutbusinesses had closed in the first quarter of 2008. Many others arerunning on "razor-thin margins," Rell said, adding that anincrease in the minimum wage could be the last straw for some.

At $7.65 per hour, Connecticut's rate is more than the federalminimum of $5.85 per hour and the nearby states of Rhode Island($7.40), New York ($7.15), New Jersey ($7.15) and New Hampshire($6.50). It is less than Massachusetts ($8) and Vermont ($7.68).

Rell on Tuesday also vetoed a related bill that would haveincreased the "tip credit" for businesses whose workers regularlyreceive gratuities, such as waiters and bartenders.

The tip credit lets hotels, restaurants and related businessespay less than minimum wage to service employees as long as tipsmake up the difference. Without the minimum wage increase, the billto increase the tip credit was unnecessary, Rell said.