Boris Johnson has warned that the government's new "compulsory living wage" could damage the campaign for employers to pay higher wages.
The Conservative mayor told the London Assembly the chancellor had "taken the wind" out of the campaign for higher earnings.
He claimed to have been in talks with a major London retailer about paying the higher rate set by the Living Wage Foundation but worried that those talks would now fail.
He explained that employers would now be able to say they were paying Osborne's new "compulsory living wage" of £7.20 an hour and therefore not feel the "impetus" to pay the higher 'official' living wage figure.
He said the motivation for employers to pay the higher London living wage of £9.15 an hour could have been removed by the chancellor's intervention.
He also warned that the chancellor's new 'living wage' was not enough to live on.
"It is not good enough for business to say they are paying the 'national living wage'. It is not enough to live on," he added.
He added that the chancellor had created a "risk of confusion" about what the living wage now meant.
"There has got to be a campaign to remind Londoners what the London living wage is," he added.
He agreed that the new measure could "muddy the waters" of the campaign for the living wage, especially in London where living costs are much higher.
However, he refused to commit to lobbying the government to introduce a higher minimum wage in London, saying that many businesses would not be able to cope.