Speaking in the House of Commons on the minimum wage Davies, a backbencher, and MP for Shipley, said the minimum wage could be a "hindrance" to some disabled jobseekers.
He said employers were likely to favour other candidates and told MPs not to"stand in the way" of those who wanted to work for less.
Mental health charity Mind, has reacted with outrage. Its director of external affairs Sophie Corlett said: "It is a preposterous suggestion that someone who has a mental health problem should be prepared to accept less than minimum wage to get their foot in the door with an employer.
"People with mental health problems should not be considered a source of cheap labour and should be paid appropriately for the jobs they do.
"It is simply unacceptable that fewer than four in 10 employers will currently consider employing someone with a mental health problem. We should be trying to educate employers and challenge negative attitudes towards mental health problems rather than forcing people with mental health problems to undercut their way in to the workforce."
Mind has found that over 50% of people with mental health problems are living on a weekly household income of less than £200 - what the Government defines as 'living on the poverty line.'
Corlett added: "Paying people with mental health problems less money than non-disabled people will not help them into work, it will just widen the poverty gap."
The minimum wage is currently £5.93 an hour for those over 21, £4.92 for those aged between 18 and 20 and £3.64 for 16 and 17 year olds.