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How do minimum-wage laws protect workers from extremely low pay?

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The Code of Hammurabi diorite stela, with carved figures at the top showing Hammurabi seated with cuneiform inscriptions below. — Labour law Diorite stela inscribed with the Code of Hammurabi, 18th century bce.

Minimum-wage laws protect workers from extremely low pay by establishing a mandatory wage floor, which serves as the lowest hourly, weekly, or monthly compensation an employer can legally pay. By setting this baseline, these laws aim to prevent the exploitation of workers who may lack the protection of trade unions or sufficient bargaining power in the labor market.12

Governments typically enforce these protections through three primary methods:
* Extending Collective Bargaining: Mandating that terms and conditions established through collective bargaining for specific groups apply to all workers in similar roles.2
* Wage Boards: Establishing boards composed of worker and employer representatives to determine legally binding minimum rates for specific industries.2
* Statutory Minimums: Using legislation, such as the Fair Labor Standards Act in the United States, to set a national or regional minimum wage applicable to broad categories of employment.12

Supporters argue that these measures enhance the standard of living and protect vulnerable employees from receiving wages below what a competitive market would otherwise afford them.12