Committee: Economic and Social Council. Background Guide. Agenda: The effect of robotic technology on future employment trends

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1 MISH Model United Nations Conference- 2015

2 Committee: Economic and Social Council Background Guide Agenda: The effect of robotic technology on future employment trends Executive Board Suhaas Putta Sathwik Reddy Chairperson Vice-Chairperson

3 A Word from the Executive Board Dear Delegates, It is indeed a great honour to welcome you to the Economic and Social Council of MISHMUN-2015 To the veterans of MUN, we promise you a very enriching debate that you ve never experienced before and to the newcomers, we are really excited to be a part of your maiden voyage. The following pages intend to guide you with the nuances of the agenda as well as the Council. The Guide chronologically touches upon all the different aspects that are relevant and will lead to fruitful debate in the Council. It will provide you with a bird s eye view of the gist of the issue. However, it has to be noted that the background guide only contains certain basic information which may form the basis for the debate and your research. You are the representative of your allotted country and it is our hope that you put in wholehearted efforts to research and comprehensively grasp all important facets of the diverse agenda. All the delegates should be prepared well in order to make the council s direction and debate productive. After all, only then will you truly be able to represent your country in the best possible way. Our aim in the council would be to urge you, the delegates to put your best foot forward and take back an unforgettable experience. We encourage you to go beyond this background guide and delve into the extremities of the agenda to further enhance your knowledge of a burning global issue. This may be a fairly technical committee for the ones with no background of economics. We have tried our best to make the economic terms very simple to understand Chairperson, Suhaas Putta Suhaas.putta1@gmail.com

4 Dear Delegates, Let me introduce myself. I am Sathwik Reddy, a junior at CHIREC International, pursuing the IB Diploma Programme, and I shall be serving as the Vice- Chairperson for your committee, ECOSOC at MISH Model United Nations I ve been interested in Economics since I was first introduced to the subject in the ninth grade. I look forward to seeing delegates delving into the world of economic affairs and I hope they come to love the subject just as I have. This will be my second time being an Executive Board member in the ECOSOC and I look forward to lively debate and interesting solutions coming out of the committee. As the Executive Board, we expect the delegates to come well prepared to be able to justify their role in the conference. While the background guide is an important resource, we hope you do not restrict your research to it. Treat it as the beginning point for your research, and build up form here. While, delegates are not expected to be well-educated in the subject of Economics, we do however; expect you to know the basics to be able to make debate more fruitful. At the end of the day the point of debate, deliberation and reflection is to come up with solutions. We look forward to thorough, practical, innovative solutions to solve the problem at hand. Looking forward to seeing you at the conference. Please feel free to contact me if you need any help. Thank you, Sathwik Reddy Vice-Chairperson iamsathwik@gmail.com

5 ECONOMIC AND SOCIAL COUNCIL Description of the committee: The United Nations Economic and Social Council is one of the six principal organs of the UN, established under the United Nations Charter in It coordinates the economic, social, and related work of the 14 UN specialized agencies, functional commissions and five regional commissions. In addition, it receives reports from 11 UN funds and programmes. It consists of 54 members which are elected by the General Assembly. ECOSOC is the central forum for discussing international economic and social issues. It also formulates policy recommendations addressed to Member States and the United Nations system. Its main objectives are: 1. Promote higher standards of living, full employment, and economic and social progress; 2. Identify solutions to international economic, social and health problems; 3. Facilitate international cultural and educational cooperation; and 4. Encourage universal respect for human rights and fundamental freedoms. The ECOSOC can make or initiate studies and reports on these issues. It also has the power to assist the preparations and organization of major international conferences in the economic, social and related fields. Further, the ECOSOC can facilitate a coordinated follow-up to these conferences. The Council's purview extends to over 70 per cent of the human and financial resources of the entire UN system. What is the Mandate of the ECOSOC? According to Chapter X of the Charter of the United Nations, the Economic and Social Council may: Make/Initiate studies or reports, Make recommendations to the General Assembly, Members of the UN or to specialized agencies, Make recommendations to promote respect and observance of human rights and fundamental freedoms, Prepare Draft Conventions to submit to the UNGA and

6 Call International Conferences. The matters which fall under the competence of the ECOSOC are: Economic, Social, Cultural, Educational and Health. All the functions that the ECOSOC carries out must be done with respect to the matters which fall under its competence. As a part of its mandate, the ECOSOC is responsible for: promoting higher standards of living, full employment, and economic and social progress; identifying solutions to international economic, social and health problems; facilitating international cultural and educational cooperation; and encouraging universal respect for human rights and fundamental freedoms. In carrying out its mandate, ECOSOC consults with academics, business sector representatives and more than 3,200 registered non-governmental organizations.

7 The effect of Robotic Technology on future employment trends: In 2014, A Pew Research canvassed 1,896 technology professionals and economists and found a split of opinion: 48 percent of respondents believed that new technologies would displace more jobs than they would create by the year 2025, while 52 percent maintained that they would not. The notion of technological unemployment leading to structural unemployment (and being macro economically injurious) is labelled the Luddite fallacy. If a firm's technological innovation results in a reduction of labour inputs, then the firm's cost of production falls, which shifts the firm's supply curve outward and reduces the price of the good (limited by the price elasticity of demand). The widespread adoption of the innovator's technology could lead to market entry by new firms, partially offsetting the displaced labour, but the main benefit to the innovation is the increase in aggregate demand that results from the price decrease. As long as real prices fall (or real incomes rise), the additional purchasing power gives consumers the ability to purchase more products and services. With technological innovation, these are often products and services new to the consumer, such as better health care or wireless communication devices and services. This increase in aggregate demand leads many economists to believe that technological change, although disruptive of individual careers and particular firms, cannot lead to systemic unemployment, but actually increases employment due to its expansionary effect on the economy. The Economist bases this belief on two assumptions - that machines are used as tools to increase workers' production, and that most workers will be able to operate those machines - and argues that the increase in computerised automation can destroy works in a disruptive way, with the new jobs being out of reach of the capabilities of most workers.

8 Luddite Fallacy, A brief history: The Luddites were a group of English textile workers who engaged in violently breaking up machines. They broke up the machines because they feared that the new machines were taking their jobs and livelihoods. Against the backdrop of the economic hardship following the Napoleonic wars, new automated looms meant clothing could be made with fewer lower skilled workers. The new machines were more productive, but some workers lost their relatively highly paid jobs as a result. A Luddite is a term used (usually pejoratively) to describe people who oppose the introduction of new technology. Yet, the idea that new technology leads to job losses has persisted, despite the fact that economists are almost universally united in stating that new technology will not increase the long-term unemployment rate. The Luddite fallacy is the simple observation that new technology does not lead to higher overall unemployment in the economy. New technology doesn t destroy jobs it only changes the composition of jobs in the economy.

9 Why Do Economists say that new Technology does not cause Unemployment? # Firstly, rapid technological change may cause some short-term temporary unemployment. However, economic theory suggests that jobs lost as a result of technological change will be created in different, new industries. When automated looms were built, it became cheaper to manufacturer clothes. Therefore, consumers buying clothes would have experienced lower prices, and therefore, after buying the same amount of clothes, they would have more disposable income to buy other goods. For example, they may now be able to afford a train ticket to go and buy a silk scarf in town. With technological change, we see increased demand for new products; therefore new jobs are created on the railways and shops selling more luxury items, such as scarves and hats. Also, there will be some jobs created in the building of the automated looms. With new technology, firms selling clothes will also be more profitable. This profit may be used to fund future investment and job creation. Over time, improved technology would mean that even automated looms become outdated. New technology may enable clothes to be mass produced with even fewer workers. Again, this would cause a relative fall in the price of clothes, and consumers would have more disposable income to buy goods, but also spend on labour intensive services. This is what has happened over the past years new Technology has enabled the economy to move towards a more service sector based economy. Lower costs of manufactured goods, enables us to be able to afford a wider range of goods and services. # Information Extracted from a Pew Research

10 But, what Happens when Robots are created that can do Service Sector Jobs? Suppose we can build robots which are able to cut hair, serve coffee and clean. Will this not finally cause technological unemployment? The principle will be the same. If robots can cut our hair, the price of haircuts, will fall thus leading to higher disposable income. We can spend money on other services which require human service or we can use the higher disposable income to work fewer hours, but still maintain the living standards. To some extent, we could say we could already build robots to serve coffee and serve meals at restaurants. But, which would you prefer being served by a robot or a human? But, in a sense it doesn t matter, improved technology which enables lower costs, enables us to have higher disposable income and better living standards. Technological change and Pareto Improvement Technological change leads to higher economic welfare, however it is not necessarily a Pareto improvement. The mass of the population see a small rise in living standards. But, some workers may see a dramatic drop in living standards, whilst they seek to to find a new job. Therefore, to attain an overall Pareto improvement, there is a strong case for a government providing unemployment insurance relief to the unemployed. So yes, the luddites were wrong. But, the total laissez faire approach of the government was also misplaced. It was wrong to smash the machines, but it was also wrong for the government to completely ignore the plight of skilled artisans finding themselves without any income.

11 Can Technological Change occur quicker than our ability to create and fill new jobs? In the long-term, there has never been any evidence that technological advances have increased the overall unemployment rate. Despite the rapid technological change of the past 20 years, we can t say that technology has left thousands of unemployed skilled weavers. In 1920, there were 1.3 million coal miners, now there are less than 6,000. That doesn t mean we have 1.3 million unemployed coal miners. Those jobs get absorbed into new areas of the economy. However, technological change can cause fairly significant levels of unemployment, especially amongst unskilled workers. For example, technological improvements led to the relative decline of heavy British manufacturing (e.g. coal industry). Many unskilled manual workers lost their jobs. At the same time, new jobs were being created in the service sector, and for more high tech skilled jobs. However, because coal miners and steel workers were often concentrated in certain geographical areas and had limited skills, it was often very difficult for them to get a new job. The coal miners who lost their job because of technological change found themselves unemployed because of: occupational immobility (lack of skills to work in service sector) geographical immobility (difficulties of moving to areas where new jobs are created) In the long-term, the unemployed should be able to take new jobs which are created. But, if the labour market is inflexible, then this time period may be considerably long. Therefore, if workers are threatened with job losses as a result of new technology, the solution is not to stop technological change, but to overcome market failure in removing labour market inflexibilities. Education and retraining to help the unemployed find new jobs.

12 A Look at the Robotics Industry: The numbers employed in manufacturing robot systems now are relatively small of the order of 150,000 worldwide. This can be compared with almost zero thirty years ago. The second group is the skilled systems integrator and the in-house skilled technicians of the robot systems. IFR (International Federation of Robotics) figures show 1 to 1.3 million robots in use. If a car plant has 500 robots this could require say 50 skilled technicians for the robots. This is 1 job gained per 10 robots. The automotive industry has 365,000 robots [IFR report] so 365,000 divided by 10 =36,000 dedicated staff. Non automotive, typically smaller robot installations, could gain proportionately twice as many dedicated staff per 10 robots installed. 656,000 robots divided by 5 or 6 =110 to 131,000 dedicated staff. The total of the two groups is 145,000 to 167,000 people. We have taken the more conservative figure of 150,000. In addition to this, there are typically new industries made possible by robotics, where accuracy and consistency cannot be achieved without robotics, but parts of traditional industry, notably motor vehicle manufacture, require robots to achieve international standards.

13 All statistics and tables courtesy :

14 Conclusion: Robotics has indeed opened up a horizon of new economic possibilities. Job opportunities that wouldn t have existed are now opening up. But there is always a flip side to the coin. In Mid-Sized Economies and Developing Economies, The effect of Mechanization of production processes has led to bleeding of jobs. In Korea, companies produce more number of cars per quarter without human intervention, than with it. Your Job as delegates is to build on this data that has been supplied to you and bring about some interesting debate on means and methods to achieve this objective of making the inevitable process of Mechanization, Digitisation etc.., lesser harmful than ever. Please remain reminiscent of the fact that the objective of the committee is to effectively find solutions to the agenda at hand. This background guide has been crafted in a way as to only let you all gain some knowledge as to the functioning of the Robotics Industry and it s economical past. If you all will notice, there is no section in this document which deals with it s effect on any specific country. It is left upon you delegates to research and bring about true world data and schematics. Having said all this, All the best delegates! We would love to have you all with us at ECOSOC. Research Ahoy!

15 Links for further research: *These links are only for referral and do not necessarily mirror true world facts and stimuli. Questions to be answered: Are robots really displacing Manual Labour? What are the steps required to be taken in order to create a healthy balance between Automated Labour and Manual Labour? How should Mid-Sized Economies retaliate to Job displacement? Should Robots replace human labour? What efforts should developing countries put in order to create more employment options?