Last week, the Madison City Council passed an ordinance that
will raise the city’s minimum wage to $7.75, a 50 percent
hike that looks to wreak havoc on the local economy and only
exasperate an already-difficult employment situation. Although the
fare increase certainly has the noble intention of putting more
money into the pockets of those earning minimum wage, the laws of
economics paint a much different, gloomier picture.

The reality is that businesses have a finite
cash flow and, in a competitive economy like Madison, if they are
forced to pay more for labor, they will have to compensate somehow.
This will likely lead to layoffs – meaning that some
employees currently earning less than $7.75 an hour will not see a
raise but rather a pink slip.

In an interview with this newspaper, the
Managing Director of a Madison-area restaurant speculated that this
mandatory wage hike could cost his eatery alone 11 jobs. Multiply
daunting figures like this through all of Madison, and it becomes
apparent that this minimum wage increase is doomed to hurt those
whom it seeks to help.

It has been suggested that higher wages will
lead to better employee retention and, thus, less cost to business
owners in terms of hiring and training. But no law currently on the
books forbids businesses from giving their employees raises when
and where it makes sound fiscal sense. This is how a market economy
is supposed to work, and the unnecessary meddling in this process
by the city is only bound to cause trouble.

And that will not just be trouble for business
owners. If Madison businesses are forced to pay employees more than
businesses elsewhere in Wisconsin (and the United States), smart
entrepreneurs will relocate their ventures to outside of city
limits. This will, once again, have the affect of morphing local
minimum-wage earners’ paychecks from $5.15 an hour to $0,
while simultaneously depriving Madison of its valuable business
base.