Doc has a nice post on why increasing minimum wages, especially when we consider the long-run, will lower the employment prospects of the lowest of the low-skilled:
One of the questions raised some years ago by someone teaching in the scionomology department was, "How can raising the minimum wage cut back on the number of our graduates who get jobs flipping burgers? You still need just as many burger flippers." [translation: isn't the demand curve for
socionomologistsburger flippers vertical?]
He was wrong, of course.
First, burger-flipping has become more automated at fast-food restaurants; burgers are partially cooked in advance and then microwaved to order.
Second, when fast food prices go up, we tend to buy more frozen food at the grocery store and microwave it ourselves. And that food is produced under much more capital-intensive conditions.
In other words, labor and capital are substitutes in the production of burgers and restaurant owners continually look for ways to provide value to their customers. That's the nature of competition (and why the term doesn't fully capture its essence - it forces business to cooperate with consumers). In addition, there are subsitutes available for the products produced by low-skilled workers.
King has more here.