Because given the choice a minimum-wage-paying employer would pay even less. That's not inconsistent with state benefits making employees richer, it's just not making them rich enough to negotiate above that level.

You saw this play out across the pandemic: business owners complained that the increased level of state aid was damaging their ability to employ at the minimum wage level.

Also it's got to be said: some people aren't good at negotiating and/or don't know their value. In aggregate the effect you see is employee supply drying up as the total number willing to work at that level decreases, but in specific there will be individuals who haven't made that choice yet.