I see a couple of problems with the approach.

First, I think moves like this will accelerate the move to temp positions. If all Walmart associates making less than 20k a year suddenly become temps, they won't owe the taxes for not paying a living wage. Not because those people are making a good living, but because they work for a different company which contracts with Walmart. You've essentially made the problem worse by ending the perk of actually being employed by the company you work for -- permanent positions. Temps don't know if they'll have a job next month, they don't even necessarily know where they'll work that day. Essentially, I think such a move will turn service employment into day-labor where you exit as a nomad going from place to place depending on who needs work that day. Forget dreaming of a living wage, they'll line up in hopes of getting a few hours of work that day, and at any time day or night because they're competing with other temps for those hours.

Second, I think that it would destroy demand for unskilled laborers. When wages go up, the workers with little experience or skill have a harder time getting their first job. And at even $10 an hour, employers are pretty picky. By $11 an hour, they want a college grad to stock shelves. If "living wage" is more than that, then anyone with less than a four year degree can pretty much give up on getting a job anymore. He isn't worth that much to the company without more specific skills, so instead of him getting a prt time minimum wage job that pays part of his living, he's wholly dependent on the taxpayers. In a sense these "bad employers" are performing a service by providing the marginally employable some money so that the government doesn't have to pay the whole thing.