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.