Mayor Michael Bloomberg for the first time outlined his demands to settle one of the biggest outstanding issues facing the city: labor contracts for hundreds of thousand of city employees.

During a speech Wednesday, deputy mayor Cas Holloway argued for big changes to the city’s labor costs, which are now gobbling up more than half of the budget.

“The Bloomberg administration is prepared to settle a new contract, with any union — with wage increase — that agrees to two conditions,” he said. “No retroactive salary increases, and a meaningful contribution to health care costs, structured in a way that incentivizes employees to live healthy.”

Still, unions unhappy with the mayor may being willing to take their chances with whomever takes over next year, hoping for a more labor-friendly administration.