In the paper, we investigate the effects of increasing minimum wages on weak-labor employment and industrial upgrading. Traditional views think that an increase in minimum wages lead to weak-labor unemployment, and to promote industrial upgrading needs government to invest a lot of resources. Our study supposes that both manufacturers and labor all subject to the influence from loss aversion. It is found that if this influence is great, industrial upgrading is difficult to succeed. It is also found that increasing minimum wages could weaken the impact of loss aversion. Hence, both manufacturers and labor will have a stronger motivation to seek to upgrade, and this will enhance the chances of success of industrial upgrading. Additionally, the study also finds that industrial upgrading can absorb the unemployed labor, and thus alleviate the problem of weak-labor unemployment.