There are times and places when service is greatly reduced because the work force is tied up in more profitable employment. Such as working in factories instead of doing butler type jobs.
One way of forcing this is making the minimum wage high enough that any venture has to make sure their workers have a high output. And some types of businesses become inviable as a consequence. Investment which would have gone to such ventures will instead go to other ventures, and workers become available for better jobs.
Yes, the significant downside is we have a bunch of people with no job. It's not economically efficient to have half the work force being paid more than their labor is worth and the other half on government assistance.
Exactly, that's the biggest down side. But you're wrong that anybody would be paid more than their labour is worth. Companies never pay any worker more than they are worth, unless it's a mistress, a nephew or an old buddy, etc.
Increasing wages (or increasing taxes on labour) are methods of forcing and increasing the minimum level of productivity for all jobs. If you have a business and suddenly have to pay your employees 20% more, then you have to make sure they are 20% more productive as well. If you are able do that with training them and/or investing in more effective processes and practices, then everybody wins. Or you have to this in combination with raising prices, which is not a bad thing if that means higher worker compensation.
Now let's say your business is not able to train, invest, and price increase enough to cover for a 20% increase in wages. Perhaps your customers simply do not accept a higher price? Perhaps the kind of business you are in has a very low return margin and thus cannot motivate investments in better tools for your workers? Then that kind of business generally goes under - or more realistically there won't be new businesses of that kind opening. For the economy as a whole this is good, that people are not wasting their time with inefficient ventures which customers are not willing to pay for.
Even considering some unemployment, this can be beneficial. Instead of two workers producing for example 100 units per day, you might have one worker producing 1000 units per day and the other being unemployed.
But for all of this to work as intended, it is absolutely necessary to have enough opportunity for workers to switch into different jobs. And why shouldn't we be able to have that?
One way of forcing this is making the minimum wage high enough that any venture has to make sure their workers have a high output. And some types of businesses become inviable as a consequence. Investment which would have gone to such ventures will instead go to other ventures, and workers become available for better jobs.
There's also significant down sides to this.