A-Level Edexcel Economics A International Economics: 1. Hand car wash (HCW) firms in

Question

1. 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, which use brushes, used to be the first option for drivers in a hurry. Now, they are finding that while the economy slows, demand for HCWs has grown. Many people see paying £5 for a car wash as something easier than cleaning it at home, especially when a person can also perform the task of a £5 car wash at home within minutes.

HCW entrepreneurs have identified available land and have benefited from changes in the labour market, partly as a result of EU migration. For migrants, car washes are a first job. “They accept car washing for a short period while they try to learn language skills and move into other industries,” says Ian Clark, a professor of work and employment at Nottingham Business School. “But there are also car wash workers without networks who are in a dead end, working there for long periods.”

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 £7.50 gives a total of £300 in costs. This assumes there are people paid the minimum wage. This is one car every seven and a half minutes. Even if the price of the service is twice as high, the car wash can still charge £5 as a living wage. This ignores all other costs which HCWs incur such as taxis.

Evidence for car-wash workers is limited but Clark and others have been able to build a picture based on the experiences of drivers. “Like nail bars and beauty salons, or car washes as 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 midlands.

Clark and his team met and observed workers who lacked waterproof boots or trousers, which they said “in combination with very strong hydrochloric acid solution for alloy wheels, has put a lot of workers on the verge of fumes,” Clark says. Some workers paid 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 storage and helps to see the soil. It could also be a requirement to have a sludge trap to stop the waste entering waterways.

Second, there is the health and safety issue. Prolonged exposure to chemicals and lack of protective clothing puts the health of workers at risk. For example, drivers would require minimum levels of protective clothing and rest periods.

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 between them. One national supermarket, Tesco, has conducted environmental audits on its car parks. It is now in a partnership with a  regulatory body and has hired a law firm to review its WashMark practices, which direct measures introduced by the industry to improve working conditions.

Involving 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.

1. 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.

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