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A deal struck by House and Senate negotiators would hike the state's current $8-per-hour minimum wage to $11 per hour by 2017, but would not tie future increases to inflation.
The Senate voted 35-4 Thursday to accept the compromise hammered out a day earlier by a conference committee that was trying to reconcile bills passed earlier by the two chambers.
The agreement calls for raising the minimum hourly wage for the state's lowest paid workers to $9 on Jan. 1, 2015, then to $10 the following year, and finally to $11 on Jan. 1, 2017.
The compromise does not include a Senate proposal that would tie subsequent increases to the U.S. Consumers Price Index.
The House version of the bill called for raising the minimum wage to $10.50 over three years, but without automatic increases for inflation.
Both chambers had originally sought to make the initial increase in the minimum wage - which has not gone up since 2008 - effective on July 1. But some employers had expressed concern about implementing the change that quickly, so lawmakers agreed to push the effective date back six months to Jan. 1.
"Even though they work hard, some of them working two or three jobs, they are not making it in Massachusetts and hopefully this is going to help them," Senate President Therese Murray said of minimum wage workers prior to Thursday's debate.
Even with the increase to $11, many would still remain below the poverty level, Murray added.
The compromise also adopts the House proposal for raising the current $2.63 per hour minimum wage for tipped workers, such as restaurant servers, to $3.75 per hour over three years. The Senate version would have gone to $5.50 for tipped workers.
Jon Hurst, president of the Retailers Association, warned the minimum wage increase could drive many stores out of business.
"It's really no compromise whatsoever from the perspective of small businesses here in Massachusetts," Hurst said. "It's a 38 percent increase in the minimum wage, far above any other state."
The four Republican members of the Senate voted against the bill Thursday. Minority leader Bruce Tarr said he was disappointed the Senate did not consider other ways of helping low-income residents, such as an increase in the earned income tax credit.
The group Raise Up Massachusetts has been gathering signatures to put a question on the November state ballot that would increase the minimum wage to $10.50 per hour in two years and require automatic adjustments for inflation.
The group called the compromise "a positive step," but said it would continue signature collection and wait until after the bill was signed into law before deciding whether to withdraw the ballot question.
The bill also includes proposals aimed at reining in what business leaders say are the nation's highest unemployment insurance costs.
Unemployment insurance rates would remain frozen for three years under the bill and rating tables would be updated. The changes would not reduce employee benefits.
Associated Press writer Steve LeBlanc contributed to this report.