It is, technically, illegal to hire an employee for an unreported cash wage. Small businesses can get away with, but only because they fall under the enforcement radar. And no, simply calling someone an "independent contractor" and issuing 1099's does not provide a loophole, as the law defines who is and is not contractor v. employee independently of applied labels.
The point is, in order for someone to legally work for you, you are supposed to pay minimum wage + taxes, so if everyone obeys the law (ha!), there should be no change in the ration of wage v. cash.
Wage v. salary, though?