ECOSOCBackgroundGuideDISCUSSING THE ECONOMIC STRAIN OF ANINCREASING NUMBER OF UNEMPLOYED INDIVIDUALS

Letter from the Executive Board:

Dear Delegates,We are enthralled to have you this year at the APL eMUN Economic andSocial Council. We look forward to seeing your creative solutions to themany current global issues. 

We have prepared this background guide for your preliminary preparations.Please do not limit your research to the contents of this document.Consider this study guide to be a starting point for your research. Weencourage you to delve further into the concepts and explore the depthsthat potential solutions have. 

SARS-CoV-2  (COVID-19) has become a global pandemic that has had nomercy nor any discrimination; it has left children and adults, the rich andthe poor, small businesses and large businesses, developed economies anddeveloping economies all largely affected, some worse than others.Therefore, we expect your solutions and discussions to cover them in asimilar fashion. Leave no stone unturned. Think of policies not just foreconomies, but also for the layman who is not receiving his wage, and isrendered helpless, unable to meet his daily needs. We hope you bring tothe committee a certain amount of realism. Perhaps not all issues can besolved through debate, but we expect they all be discussed. We would alsolike you to note the phrasing of the agenda. The topic of discussion is the“Economic Strain'' of the unemployment crisis. This means we expect foryou to not just be discussing the plight of the people, but also the effectsthat large amounts of unemployment have on economies.  

We are excited to have you at ECOSOC this year and look forward to yourparticipation. Do not hesitate to contact us on Dscord with any doubts orqueries.

Guest Chairperson: Udit Samant

Vice Chairperson: Vaishnavi Nanda Kumar

Director: Arnav Sainath

What does it mean to be a delegate inECOSOC?

The Economic and Social Council, ECOSOC when abbreviated, wasestablished under the United Nations Charter in 1945. The UnitedNations has 6 main organs, and the Economic and Social Councilis the second organ. It’s very important we do not confuseECOSOC with ECOFIN. ECOFIN or The Economic and FinancialCommittee is the second subsidiary committee of the UnitedNations General Assembly. For more about ECOSOC please visithttps://www.un.org/ecosoc/en/about-us.

Now that we have covered some debatably useless facts andinformation about ECOSOC, let us answer the question: ”Whatdoes it mean to be a delegate in an ECOSOC Committee?” It isquite a simple question to answer yet it has become quiteimportant, as many tend to forget. ECOSOC is a committee thatseeks to improve the overall global economic and social wellbeing. So, what does “global economic and social prosperity”mean? Well, it can mean many things. Many consider it to beworking towards meeting certain thresholds or goals like theStandard Development Goals (SDGs). But on a more fundamentallevel, it means economic stability and improvement, as well asproper community integration and interaction at every level.Starting from “the people” and ending with “the country”. For all toprosper. It is important for all delegates to keep this in mind whiledebating and discussing policy.

Glossary - Important terms to know:

Global Supply Chains (GSCs) - A Global Supply Chain is the process bywhich certain goods are made over a global network of markets andcompanies and distributed to the consumer. For example, cars are aproduct that have various  components made in different parts of theglobe, that come together and are assembled in one region. The process ofmaking the components, assembling them and selling it to customersacross the globe is what a Global Supply Chain does. Global Supply Chainscreate many jobs across the world.

Wages - Wages are defined as monetary pay, that is often paid either on adaily or weekly basis. For example, factory workers are paid every day thatthey attend their workplace. There are also individuals in other professions,such as athletes, who are paid weekly.

Protectionism - Protectionism is the theory or practice of reducing theimpact of foreign competition for domestic goods by increasing import tax.For example, if country A wanted to protect domestically produced milk anddairy products from foreign competitors, they would simply increase importtax to discourage the purchase of imported goods. In theory, the idea ofprotectionism would likely benefit local producers and local economies,however, in practice the effects are detrimental to the larger economy inthe long run.

Remittance - (Global) Remittance is the transfer of money, usually in thecase of foreign workers back to their home countries.

Informal Economy and Jobs - The informal economy is the part of anyeconomy that is neither taxed nor monitored by any form of government.Informal sectors usually make up a significant portion of the economies indeveloping countries. Similarly, informal jobs are not taxed or monitored bythe government. These jobs usually have payments in cash. 

Migrant Workers - Migrant workers are individuals who move to anothercountry or area in order to find employment, in particular seasonal ortemporary work. They do not intend to stay in the host countrypermanently.

Glossary - Important terms to know:

IntroductionAs a result of stay-at-home orders, nonessential businessclosures, health concerns, and reduced demand for products andservices, many workers have stopped working. The labour marketis now undergoing tremendous stress because of the COVID-19outbreak and subsequent mitigation efforts. Unemployment issoaring high and continuing to increase throughout theselockdowns. With many now losing their jobs, it's quite uncertainhow many jobs will recover even after the relaxation of COVID-19lockdown measures. 

The United Nations International Labor Organization (ILO)estimates that more than 25 million jobs have been threateneddue to the spread of novel coronavirus globally. Around 81% ofthe global workforce of  3.3 billion people have been affected byeither partial or full workplace closure, and 94 per cent of theworld’s workers are living in countries with some sort of workplaceclosure measures in place.  The international labour Organisationalso estimates a decline in working hours of around 10.7 per centrelative to the last quarter of 2019, which is equivalent to 305million full-time jobs. Additionally, The International LabourOrganisations (ILO) shares how young people aredisproportionately affected by the COVID‑19 crisis. A total of 178million young workers around the world, more than four in tenyoung people employed globally, were working in hard-hit sectorswhen the crisis began. Almost 77 per cent (or 328 million) of theworld’s young workers were in informal jobs, compared witharound 60 per cent of adult workers (aged 25 and above). Evenbefore the crisis, more than 267 million young people were not inemployment, education or training (NEET), including almost 68million unemployed young people. 

So what does this all mean? There is first, the very visible cost: thecost to the average unemployed individual. When a person losestheir job, there is often an immediate change of a person’sstandard of living. Even for those eligible for unemploymentbenefits and other forms of government assistance, it is often thecase that these benefits replace 50% or less of their regularincome. That means these people are consuming far less thanusual. However, the economic consequences of unemploymentcan go beyond just less consumption. Many people will turn toretirement savings in a pinch, and draining these savings has long-term ramifications. 

This only the case with developed and few developing nations. Indeveloping nations, many either continue to work similar hours tothat pre-crisis if allowed, with the large risk and possible burden ofbeing unable to pay expensive medical bills in the case they fall ill,or are rendered helpless if they are unable to work. For thesepeople, who do not make stable yearly salaries, it is not a choice, itis a matter of sustaining themselves.

Prolonged unemployment can lead to an erosion of skills, robbingeconomies of otherwise useful talents. And that can be saidespecially for unemployment in the aerospace industry, whereeven after a few weeks of unemployment one loses theircertification.

Economic BurdenThe economic costs of unemployment are quite visible, especiallyif one looks at the budget for a particular year. Unemployment incase of advanced and emerging market economies leads to higherpayments from governments for unemployment benefits, foodassistance, and medical aid.

Developed nations now have to sustain unemployment benefitsfor a large number of unemployed individuals. This is not aburden that any country can hold for a long period of time,especially with the unemployment rates that COVID-19 hasproduced. Yearly Budgets are not subject to large amounts ofchange. So, how can a country in any particular yearaccommodate, what we are seeing, up to ten per cent an increasein unemployment? In many cases countries increase corporateand business taxes. Which disincentives companies to hire oreven keep some workers. This creates somewhat of a slow butlong-lasting cycle of increasing unemployment.

For the case of many developing countries, it makes it yet anotherfactor that is keeping them from growing their economies. Thoughthe costs are much less apparent in many developing countries,as they do not have unemployment benefits, they are verydangerous. Large amounts of unemployment reduces the grossdomestic product (GDP) and moves countries away from theefficient allocation of resources. For the case of developingnations, it is much scarier. Budgets no longer work. How cancountries segregate and allocate funds for multiple schemes andpolicies, when they can not afford even a few?

As mentioned earlier studies also show that large unemploymentdiscentivises many individuals in countries to seek and to helptheir families seek education. This can reduce the number ofskilled workers that economies receive by quite a large amount(covered later). 

Another aspect to consider for many developing nations is thedecline of remittances. The pandemic has largely affected howmuch migrants have been sending back home to low - andmiddle-income countries (LMICs). It has been projected that theamount of global remittances will have a sharp decline: a fall by

a fall by about one fifth this year. There are few reasons for this.Firstly, there has not been much support for migrants.Governments have been prioritising providing safety nets todomestic workers. This means that many migrant families haveless, and sometimes even no, disposable income. The decline alsoresults from a host of issues caused by the coronavirus for theservices that migrants use to send money home: including therestrictions placed on remittance services providers (RSPs) andtheir agents. In summary countries such as India, and othercountries that have large immigration, are having a large reductionin the injection of funds through remittances. There are somecountries that primarily rely on remittances such as Tonga, Haitiand Nepal where almost a third of the GDP consists of them haveseen a significant decline in economic activity and have sufferedfrom the recession. Remittances play a vital role in fosteringeconomic growth and development, this has been stifled in suchcountries due to the newfound difficulty of making internationaltransfers as well as the surge in unemployment in developedeconomies.

Labour and Migrant workers at a closer lookDue to the physical nature of labour work, it has been largelyrestricted. This is inevitable. Curbing COVID-19 effects requiresproper social distancing and restriction of movement. This madethe lives of many labour and migrant workers even more difficultthan already before. As the ILO Director-General has shared: “Formillions of workers, no income means no food, no security and nofuture. [...] As the pandemic and the jobs crisis evolve, the need toprotect the most vulnerable becomes even more urgent.” There isnot much scope for solutions to this issue. That is why it is soimportant to understand the plight of these workers in as muchdetail as possible. The better understanding that is achieved themore likely that a successful change occurs.

The situation with the labour market is quite a strange one, and soit is important we understand a few things. Firstly, labour workers,migrant workers, and other wage workers are usually part of theinformal economy. This means that they are not closely monitorednor are they taxed. That is why it is quite difficult to givecompletely accurate figures regarding these economies.Developing economies (countries) usually have larger informalsectors than developed nations. And as the informal sector is inmajority made up of labour workers, developing nations havebeen hit quite hard. 

The next thing to understand is that on average (for mostcountries except China) the number of available jobs has beenreducing, while demand for jobs has been increasing. This is infact not the case with the informal sector. Due to COVID-19restrictions, most labour workers can not work. This means thatthere is a demand for labour. There are many available jobs forthose in the labour industry. It’s just that these jobs are largelyrestricted. This means that many businesses, especially ones inmanufacturing, have taken very large losses. 

Let us now take the case of migrant workers. Now a great exampleof the need of migration workers is in agriculture. There are goodamounts of work migration, especially for developing nations,during the harvesting season (or times). For the case for migrationworkers, depending on the time of the year they are in differentstates/provinces or countries. Now with COVID-19 restrictions, thelives of these workers have been greatly distorted. Many countriesand states require a quarantine of a fortnight, where many ofthem have large quarantine charges. Wherever work is allowed,there has been a requirement of testing very frequently. Makingjobs quite uncomfortable for workers. For many migrant workers,the struggle that they have to go through outweighs their pays. 

In conclusion: of course, COVID-19 restrictions should not berelaxed immediately, but it is important to have some sort ofsupport for these workers, aside from subsidised food andmedicine. Not just for their sakes, but also the businesses thatdepend on them. It is important that we find a method where wecan allow as many labour workers to work properly, whilemaintaining social distancing norms and sanitisation standards, aspossible.

Societal Impacts of UnemploymentThere are social costs of unemployment. These can be difficult tocalculate but are no less real. When unemployment becomes alarge issue, there is often increased pressure, usually political, forprotectionism and draconian restrictions on immigration.

Protectionism leads only to a destructive back and forth retaliationamong multiple countries. Thus many countries are de-incentivised to trade. Protectionism, which is explained in theglossary, is quite a dangerous “my-country first” ideology. So whydo some countries consider it? Protectionism has a largemomentum when domestic businesses and products have lowdemand. Countries consider protectionism usually in times ofrecession when budgets seem to be hard to meet and notexceed. They try to aid and stimulate local businesses. This is acountry here for the very-short term benefit of increasing taxes onmany imports. Ironically businesses and countries are nowdissuaded to trade with that particular country the following year,thereby having the exact opposite of the intended outcome. Notto mention the political consequences of such policies. Countriesthat increase protectionist policy will usually receive backprotectionist policy from other countries. Quite the perverseeffect. Countries here try to increase revenue but the outcome inthe following year is probably a large decrease, at least fromimports.

IImmigration, an issue that has become heavily politicised, is alsoquite a serious issue. When countries start to restrict immigrationthere can be large consequences. Due to the very political natureof the discussion on immigration, not only has it become hard todiscuss but also many of the times discussions and arguments arenot evidence-based. Immigration contrary to a large, growing, andpopular belief has no evidence to suggest that immigration leadsto job losses. In fact, immigrants increase the supply of labour,they also spend their wages on homes, food, TVs and other goodsand services and expand domestic economic demand. Thisincreased demand, in turn, generates more jobs to build thosehomes, make and sell food, and transport TVs. They also accountfor, in many countries, large parts of the government income. It isunderstandable that countries restrict the travel of non-nationalsinto the country due to the current situation, however, this, ifcontinued for an extended period of time, could have a dangerouseffect on economies, especially ones that already had largeimmigration. 

Another social repercussion of large unemployment (either director indirect) is how it can alter workers’ plan for their futures.Research shows that prolonged unemployment can possibly lead to greater skepticism and pessimism about the valueof education and training, and lead to workers being less willing toinvest in the long years of training some jobs require. On a similar note, the absence of income created by unemployment can force families to deny educational opportunities to their children and deprive the economy of those future skills.

(Crime has also been thought to be closely related tounemployment. The general notion has been that crime isproportional to unemployment in general, however, until quiterecently job loss itself has not had any evidence to show for acorrelation with crime. The graph here summaries a studyconducted recently. It shows the probability to commit crimes(total), property crime, driving under influence (DUI), and violentcrime, a certain amount of time after being “displaced” (losing ajob). The graph closely relates elongated times of unemploymentwith a greater probability of committing crimes. As the number ofrecoverable jobs reduces, it is essential that we find means toreduce crime and ensure a certain threshold of general publicsatisfaction. 

Conclusion: Though the agenda, for the most part, considers theeconomic repercussions of large unemployment, it is difficult toisolate economic issues away from social issues. It is alsoimportant that any potential policy change takes intoconsideration the general satisfaction, well being, mental state of apopulation. Therefore, it is vital to have discussions on theseissues.

Rent and HousingAs we have discussed earlier unemployment has exponentiallyincreased over a short period of time. This unexpected and largewave of unemployment has many quite badly. With much lessmoney coming in every week for many, individuals are findingdifficulty keeping up with their housing payments and contracts.Both renters and homeowners are each facing struggles in someway and it is important we consider them in the debate. It isespecially important we do consider the continuous increase inunemployment. This is an issue that likely to continue to grow andit is crucial that we consider policy changes to address theseissues as soon as possible.

Governments have reacted quite swiftly to the Rent and Housingissues. Many countries have restricted eviction by placingmoratoriums on evictions: some lasting up to six months. Manycountries have also placed mortgages deferments, or property taxreductions to only in the case landlords reduce rent. However, thepolicy in place right now can only prevent the issue of rent andhousing for so long.

(Firstly, there is the issue of moratoriums. Though evictionmoratoriums may initially seem like sound policy, they are quitedangerous by themselves (they could be a good solution alongwith other policies). Most countries have not been providing rentor mortgage relief. This means that there are many renters thatsimply can no longer afford their monthly payments. Some arechoosing to defer or partially pay their monthly rents bynegotiating with their landlords. However, there are a few that arechoosing not to pay at all. Some because they simply cannot pay,and some because they are on rent strikes. What most individualsdo not understand is that quite a large percentage of rentreceived by homeowners is used to pay mortgage payments,property taxes, and maintenance-associated costs. It is becomingincreasingly difficult for homeowners to break even with theirhousing costs, and because of moratoriums on eviction theycannot remove their tenants. If homeowners defaulted on theirmortgages that would be a tremendous financial catastrophe.Fortunately, overall house pricing has not fallen by a considerableamount. Which is usually a good indicator of a housing crisis:falling house prices. That is why countries, especially developedones, need to change policy. Providing some form of incentive forhomeowners to reduce rent or providing rent relief to rentersthemselves are potential solutions. However, many countries arealready bearing large costs and losses associated with COVID-19.

ConclusionWe see on the news how governments and policymakers discussand fret over the many consequences of inflation, butunemployment is just as serious an issue. Apart from the socialunrest and general dissatisfaction that unemployment canproduce, high unemployment can have an everlasting negativeimpact on businesses and the economic health of a country.

Worse still, some of the more dangerous effects of unemploymentare both subtle and very long-lasting.Consumer and businessconfidence are key to economic recoveries, and workers must feelconfident in their future to invest in developing the skills, andbuilding the savings, that the economy needs to grow in thefuture. The cost of unemployment goes far beyond theaccumulated sums handed out as unemployment insurancebenefits, and all countries must start to recognise that.

We hope you now have a good understanding of the issues thatmany are facing worldwide. Below are a few links to start yourresearch. Some of them are entire reports, please do not readthrough them. They are quite long. We recommend that you skimthrough important information. Thank you for registering for APLMUN Lockdown Edition - ECOSOC, and Good Luck to you all!

Sincerely,APL MUN ECOSOC Executive Board.

Helpful Links:

https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/wcms_745963.pdf

https://www.bloomberg.com/press-releases/2020-07-09/covid-19-impact-and-recovery-analysis-real-estate-property-purchasing-procurement-intelligence-report-forecasts-spend-growth https://www.investopedia.com/articles/personal-finance/062315/unemployment-rates-country.asp

https://www.bloomberg.com/opinion/articles/2020-05-12/covid-19-will-sicken-the-housing-market-until-the-pandemic-lifts

https://www.cnbc.com/2020/05/06/can-airbnb-survive-the-coronavirus-pandemic.html 

https://www.newindianexpress.com/states/tamil-nadu/2020/jun/04/covid-19-crisis-50-of-msmes-struggling-to-pay-salaries-and-rents-says-study-2152239.html

https://www.imf.org/external/datamapper/LUR@WEO/OEMDC/ADVEC/WEOWORLD