I don't see the logic in your question regarding the living wage.
I assume the pervasive use of illegals is because many businesses try to get by on as cheap of wages as possible. They usually "pay" for this with high turnover, retraining, poor customer satisfaction due to employee churn and always the dance with the IRS/INS.
And you are correct, most are not paid a living wage, however they are paid so much better than the .25-.75 per hour paid in Mexico that $5-7.00 per hour seems like gold for a while.
They don't, however address cmitch's issue of hiring quality workers who will work. The contractor that is doing my garage has both American and Mexican workers, all legal. Their pay rates are $13-17 per hour for laborers. They and their families can live on that. Because he pays them better than many in town [and on time] they will work from dawn to sunset and weekends to do work for him.
His gang has restored my faith in contractors.
Okay, I need to give you a case in point. My General Manager and I went to a lunch with the mayor, an event that is sponsored by the area Chamber of Commerce. One gentleman, who owned a small tool and die firm, was complaining about the same thing. He offered $12.00 an hour to START. That is, the guy would come in with little knowledge (usually high school vocational candidates), and he would expend his company resources to train this man. He said it took at least 1 year to get the average hired in laborer to optimal performance. The guy would come in, draw his $12.00 hour long enough to qualify for unemployment benefits, goof off and get fired, then draw his check. He also pointed out he had to fire two previous employees for drug use.
The problem is, because our unemployment here was 3.9% at the time (it's about 4.5%, now), the hiring pool was poor. You had those drawing unemployment who do not want to work until their benefits expired, those who got fired for drug use or never hit a lick at anything, anyway and those who genuinely need a job. The desirable workers are already working somewhere else, making $16 to $20 per hour. He has two choices, hire out of the labor pool containing few quality workers or try to 'coax' one of the experienced to come over for a couple more $ per hour. Even if he manages to budget out for one of the experienced guys, there's still a learning curve to get the guy to do the work like he wants it done, not like it was done at his former workplace. So, either way, the worker expends company resources being trained.
So, most businesses choose to hire inexperienced workers because they get to train them to do what they want. But, the problem of finding a good candidate has to be overcome. Someone who will show up, show up on time and do a good job when they are there. I, speaking from a management point of view, want someone to prove themselves to me. I'm not going to advocate paying 'living' wages to someone whom I know nothing about, whether they can do the job or not. We've been through 3 folder operators in the last year because the first was incapable of delivering satisfactory work, the second was too busy being a damned grown up teenager to show up (did good work -when he was there) and the third that we have now is a work release that was hired as a 'favor' to another guy (not my idea).
So, one could ask 'What wages are fair?' to hire these kinds of goobobs. The job is a general labor job with opportunity for advancement. It doesn't take a great deal of skill to run the folder, but you need skill to troubleshoot. It starts off $1.50 to $2.00 hour more than minimum wage, with a raise in 90 days, depending on job performance. That's where our senior pressman came from and he's knocking down some good money. But, most want it NOW. They don't want to earn their way to the top. They don't want to put in their dues.
While 'Business Ethics/Philosophy' may dictate that you pay a 'living wage', you must also understand that paying a living wage to an unknown quantity is not good sense. So, employees should prove themselves first, then their pay checks will reflect that, not the other way around.