A-Level Edexcel Economics A Government Intervention: Hand car wash (HCW) firms in the

Question

Hand car wash (HCW) firms in the UK

Extract A

What is the true human cost of your £5 hand car wash (HCW)?

The UK’s hand car washes (HCWs) are extremely price competitive, but they have also been linked to modern slavery. Are they ever fair for workers?

There is little agreement about how many HCWs there are in the UK. Estimates range from 10,000 to 20,000. This lack of accurate information about the industry makes government regulation very difficult. Automated car washes, with their mechanical bristles, used to be the first option for drivers in a hurry. Now, there is more choice. While the economy slows, car washes seem to fail to keep up with the demand for HCWs. As the number of these wash stations grows, many people see paying £5 for a car wash done by someone else, rather than cleaning it at home, as a small cost that makes life slightly easier. But what is the true cost of a £5 wash for workers?

Many drivers are only interested in getting the cheapest wash. If the price is very low, it probably means that workers are receiving the minimum wage or are working in poor conditions. Crude calculations illustrate the problem. A £5 HCW employing five workers for 10 hours a day at a rate of £9 (which is 79% of the average wage) incurs a cost of £450. This assumes the driver is paid the minimum wage. This is one car every seven and a half minutes. Even if the profit can be slashed to get the service, the price can be as low as £5 pays a living wage. This ignores all other costs which HCWs incur such as insurance.

Evidence from car-wash workers is limited but Clark and others have been able to build some evidence from both HCWs and licensed forecourts. "Like nail bars and hairdressers, car washes are what we call 'hard-to-reach places,'" Clark explains. As part of the research, Clark and his team spoke to workers from 45 HCWs in the UK.

Clark and his team met and observed workers who lacked waterproof boots or trousers, which would be essentials for those working outdoors. Workers then expressed their frustration over the fact they were provided with only basic “hydrochloric acid solution for all their work, combined with the vague and forms” Clark says. Some workers said a little over half the minimum wage.

(Source adapted from: https://www.theguardian.com/world/2018/jul/16/true-human-cost-5-pound-hand-car-wash-modern-slavery)

Extract B

Government intervention in the HCW industry

There are three main areas of government intervention that might impact on labour intensive firms such as HCWs:

First, there is the planning issue which focuses on the impact on the environment, for example, the disposal and recycling of waste water and chemicals. There could be planning regulations to prevent the use of tarmac rather than concrete on forecourts. Tarmac allows water waste to seep into the soil. It could also be a requirement to have a sludge trap to stop the waste entering water courses.

Second, there is the health and safety issue. Prolonged exposure to chemicals and lack of protective clothing puts the health of workers at risk. Furthermore, there would also involve minimum levels of protective clothing and health screening.

Third, there is the issue of tax. The informal nature of the business type makes tax evasion easier.

Not all UK HCWs violate regulations. There are legitimate, regulated HCW firms as well, as examples of good practice can be found in quite a few places. One national supermarket, Tesco, routinely checks the wash businesses to ensure that its parks. It is now in a partnership with the local council to ensure any business wanting to operate as a washMark owner and as a model for good practice.

Introducing drivers in the issue, and making them demand fairer car washes, creates an incentive for good businesses to improve practices and come forward to get a WashMark certificate.

(Source adapted from: https://www.parliament.uk/documents/committees/environmental-audit/Hand-Car-Wash-evidence.pdf research into HCWs by Professor Ian Clark, Nottingham Business School)

1 (a) Using the information provided, explain the market structure that best describes the hand car wash (HCW) industry in the UK.

(b) Examine two reasons why the demand for HCWs increases during a period when consumer incomes fail to keep up with inflation (Extract A line 8).

(c) Discuss the likely effects of changes in the level of migration on firms such as HCWs in the UK. Use a labeled market diagram and the information provided to support your answer.

(d) Evaluate the microeconomic and macroeconomic factors which determine the number of firms in an industry. Refer to HCWs or another industry of your choice.

OR

(e) Evaluate the microeconomic and macroeconomic effects of increased government intervention in an industry. Refer to HCWs or another industry of your choice.

Hand car wash (HCW) firms in the UK Extract A What is the true human cost of your £5 hand car wash (HCW)? The UK’s hand car washes (HCWs) are extremely price competitive, but they have also been linked to modern slavery - Edexcel - A-Level Economics A - Question 1 - 2021 - Paper 3

Using the information provided, explain the market structure that best describes the hand car wash (HCW) industry in the UK.

Examine two reasons why the demand for HCWs increases during a period when consumer incomes fail to keep up with inflation (Extract A line 8).

Discuss the likely effects of changes in the level of migration on firms such as HCWs in the UK. Use a labeled market diagram and the information provided to support your answer.

Evaluate the microeconomic and macroeconomic factors which determine the number of firms in an industry. Refer to HCWs or another industry of your choice.

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