Please read through this in its entirety. It might look long, but I think it reads pretty quickly.
If you've ever paid attention to a word I've said (why you would do that is beyond me), you know that I oppose the minimum wage and hikes thereof. Countless times on this site, I've offered countless explanations of how the minimum wage hinders progress, causes inflation, increases poverty, decreases employment, etc.
However, I have not once offered an explanation to how elimination of the minimum wage would work in a truly free market. Now, when I say free market, I want to be clear: I'm talking about a market that is governed only by the laws of supply and demand. In this market, there would be no government intervention, that is, no labor codes, no unions, no intellectual property laws, and (obviously) no minimum wage.
I find that the best way to explain things is through use of an example. If I were to try to abstractly explain this, I'd probably catch myself up in a heap of jargon which would be rather unintelligible, considering I would be making up most of my own terms.
So, let's say that there are five factories. Each of these factories manufactures widgets (they're so useful in the summer, I find). At present, Wurther's Widgets has the highest quality widget in the United States. Because of this, Wurther's Widgets are also the most expensive. In the free market, this would likely mean that any consumer who actually cares about the quality of his widgets would pay the extra $2 or $3 for a widget made by Wurther. We'll say that this consists of 50% of society. The rest of society goes for the cheapest widget.
Wurther's Widgets is a very cunning company, so they do a lot of consumer polls. Time and time again, the results from their polls, which poll random landline phones, show that an overwhelming percentage of the population regard Wurther's Widgets as the best.
The first course of action for Wuther's Widgets is to try to raise the price of their widgets. Wurther sees that this fails because eventually the price goes too high, and most consumers go for the second best (if not the cheapest) widgets.
One day, Wurther's Widgets decides that they want to try to monopolize the market on widgets. To do this, they propose that they lower the price of their widgets, and, since their widgets are the best, the other companies will lose all their revenue because there is no reason why every consumer wouldn't buy a widget from Wurther's.
Well, in order to do this, Wurther's has to drastically decrease the wages of his employees, mostly those who work in the factories. Word gets out that Wurther's is decreasing the wage of his employees, and the executives at Orlaf's Widgets hear.
Now, Orlaf's has historically been second behind Wurther's. Because there is no intellectual property, the secret to Wurther's Widgets are known and protected by the employees of Wurther's and them alone. Up until Wurther's decision to decrease prices and wages, the empoyees of Wurther's were more than willing to oblidge by Wurther's code of silence. However, now that their wages have been significantly reduced, they aren't so sure.
So, the people at Orlaf's Widgets decide that they'll take advantage of Wurther's disgruntled workforce (it should be noted that before the price increase, Wurther's workforce was significantly gruntled), by posting scouts and recruiters outside of Wurther's factory. It might not even be in the form of people. It could be fliers posted on cars and telephone poles in the area.
The workers at Wurther's see that Orlaf's is hiring and they know that Orlaf's offers better wages than Wurther's, so they flock to Orlaf's in search of a better paying job. Upon being hired, they are asked for the secret to Wurther's widgets. Some, who still have a warped sense of honor, refuse to offer up the secret, but, soon enough, Orlaf's has the secret to Wurther's and begins to produce widgets for a slightly higher price than Wurther's.
Reaction to Orlaf's Widgets is mum at first. Wurther's are still priced lower, but as his workforce diminishes and workload on the individual employee begins to mount up in comparison to his wage, Wurther's is soon forced to increase its worker's salaries and again raise their prices, restoring the competitive market, but having lost a company secret.
In a truly competitive, free market without intellectual property laws, a company is forced to keep their employees happy (through wages, benefits, safety provisions, etc.), lest their employees leave the company for the competition and reveal their trade secrets.
Now do you see how free market economics without government intervention is progressive?
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