I have a potential employer who wants to hire me as an employee. They want to pay me $33 per hour and $17 per hour as "per diem". They are telling me that is not taxable money. I think they are incorrect.
Can someone explain to me the risk I am taking?!

Assuming everything else is correct, your risk is nothing. Per diem payments are not recorded or reported as taxable income. They are payments to offset job costs such as travel or lodging.

It seems to depend on several factors as to whether a per diem is taxable or not.

Information from the IRS:
http://www.irs.gov/pub/irs-regs/per_diem_faq_%26_a_v1.pdf

Per Diem Rates:
Per Diem Rates (http://www.gsa.gov/portal/content/104877?utm_source=OGP&utm_medium=print-radio&utm_term=perdiem&utm_campaign=shortcuts)

There is no risk to you. Per diem is quite common for employees who have to travel as part of employment. You must, however, keep track of amounts as you must report this at tax time. Employer does not deduct tax for this out of your pay roll. Probably what they meant

I agree that the risk is negligible, but NOT non-existent.

Keep a close track of your expenses that the per diem is meant to pay. If it turns out that the per diem IS taxable, you will need to claim those expenses on Form 2106 to offset the added tax.