A-Level Edexcel Economics A Macroeconomic Objectives & Policies: 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 rotating bristles, used to be the first option for drivers in a hurry. Now, there is more choice. While the economy sometimes can fail to keep up with rising wages, the demand for HCW has grown. Many people see paying £5 for a car wash by someone else, rather than cleaning it at home, as a small luxury or a convenience. But what is the true cost of a £5 car wash?

The Covid-19 pandemic has caused a significant shift in the structure of industry in the UK. Many petrol stations have closed as drivers fill up at supermarkets. Garages and their forecourts have closed as cars become more reliable and locked into service agreements. The available sites for HCWs have therefore increased significantly and rents have fallen.

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 foster their 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 would see each worker earning £1.00 per hour, which assumes there are peaks in the minimum wage. This is once a car every seven-and-a-half minutes. Even if the price can be justified on its service, the price can be as low as £5 pays a living wage. This ignores all other costs which HCWs incur such as rent.

Evidence from car-wash workers is limited but Clark and others have been able to build a picture of their experiences. "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

Midlands. His team met and observed workers who lacked waterproof boots or trousers, which compounded the issue of long hours and low wages. "The spray from high-pressure hoses can be uncomfortable, and the drivers rarely provide food or drinks."

Clark said they suggested using 'spray from high-pressure hoses' and using the vapour foams, Clark says. Some workers spend 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 and waste to drain to the soil. It could also be a requirement to have a sludge trap to stop the waste entering watercourses.

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, regulations 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 among larger outlets. One national supermarket, Tesco, encourages their contractors to meet standards for parks. It is now in a partnership with the driver’s group which is going to work to ensure they have a WashMark certificate, which proves it abides by these regulations.

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/commons-committees/ environmental-audit/Hand-Car-Wash-evidence.pdf research into HCWs by Professor Ian Clark, Nottingham Business School 25)

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.

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