Working Poverty, Monopsony Power and the Informal Labour Market

Here is an important applied example of monopsony power and working poverty. There are an estimated 5,000 hand cash-washes in the UK and new research from Nottingham Trent University finds that the majority do not comply with the basic building blocks required for people working in the formal labour market.

More than 90% of hand carwashes in UK employing workers illegally, study finds (Guardian)

Only 6% of the carwashes had written contracts with workers while just 11% handed out pay slips so that they could prove they were paying the legal minimum wage, holiday pay or sick pay. Less than half (41%) were registered companies, indicating most are not registered with the tax authorities.

There has been an explosive growth in hand car washes in the UK employing thousands of people but the majority have no formal employment protection and "owners" can exploit their monopsony power but not paying the minimum wage and avoiding direct taxes.

Voluntary codes of conduct rarely do enough to protect employment rights. Is there a case here for much stronger government intervention?