Recently I was demoted from a mechanic back down to an operator at my plant. When I first took the promotion to mechanic I jumped from $8.65/hr to $10/hr. I was a mechanic for 2 years and in that 2 years I received 2 raises. I understand that my demotion takes me back to my original pay of $8.65/hr but am I entitled to the 2 raises given me as a mechanic or can they eliminate those as well?

As far as the law is concerned, the only thing they HAVE to give you is the higher of state or Federal minimum wage.

Unless you have a CBA or a bona fide contract that says otherwise, they can take you all the way down to minimum wage. No law in any state requires that you ever be given a raise unless you are working at m/w and m/w is raised by the appropriate legislative body.