The exact unemployment rate in Nepal has always been debatable. Some agencies report it to be around 20 percent while others report it to be around 40 percent. So, the unemployment rate of Nepal depends on who you ask. What is not debatable is the fact that solutions that have been tried have always been a blanketed approach to reduce unemployment throughout the nation. What our policymakers have to realize is the fact that blanketed approaches don’t usually work.
There are three kinds of unemployment: structural, frictional, and cyclical. Frictional unemployment occurs when people move from one place to another or when they quit one job to find another. Cyclical unemployment occurs when people lose their jobs due to business-cycle fluctuations. It increases when an economy is in a decline. Structural unemployment occurs when the labor force lacks the necessary skills and training to make itself useful in the new way of doing things.
In Nepal, people from low-opportunity areas have always moved to areas where jobs are aplenty. Also, a dearth of jobs means quitting one to find another has not been a luxury available to Nepali workers. So, frictional unemployment isn’t really a big issue for us. Also, the Nepali economy has been growing steadily at around 3 percent a year. We are not in a recession, and thus, we should not worry too much about cyclical unemployment.
Financial sector, however, has been flying high in Nepal. Despite what we believe, private education in Nepal has become an industry in itself and has been growing rapidly all over the country. The construction sector is also booming. But, manufacturing industry is in the dumps, and agricultural production is also in decline. This has resulted in an increase in net unemployment because the declining effects far outweigh the positive effects. Manufacturing and agricultural labor force in Nepal lacks the necessary training and skills to succeed in construction, education or financial sectors. This lack of transferable skills among the labor from different sectors has resulted in growing structural unemployment in Nepal.
Growth in financial and banking sector has resulted in lots of jobs. Education and housing industry boom has given jobs to thousands. Manufacturing industry, which depends on huge amounts of energy for production, has been severely handicapped due to load-shedding and lack of alternative energy options. Competition from other countries along with lower returns has, all but, destroyed the agricultural industry which, according to the latest National Labor Force Survey, still employs around 51 percent of the labor force. In comparison, the construction and financial industries, which are booming, each employ only about 1 percent of the entire labor force.
The solution, currently in use and promoted by our government, has been to send these low-skilled laborers abroad for jobs. While remittance money from overseas workers has been helping us in the short-run to fulfill our consumption desires, it is not a viable option in the long-run. Studies in many nations that faces employment migration have shown, repeatedly, that remittance does not create jobs and has no contribution in reducing inequality. Our policymakers seem oblivious to this fact, seeing how they have been going about their business of signing agreements with other nations to send our labor force overseas for jobs.
What, then, is the solution? We know that agriculture can no longer remain our number one industry. As in all other nations that have developed before us, other sectors are bound to surpass agriculture as our leading contributor to GDP. However, we should not give up on agriculture right away because it still employs the largest share of our labor force. We should design programs to reform agriculture; provide technical support to farmers; provide healthcare; improve irrigation facilities; introduce scientific farming techniques, for example, drip irrigation; and provide storage facilities to farmers. Agriculture in Nepal cannot sustain itself without government intervention and reforms As this industry is too huge to sustain itself via individual efforts from farmers.
More importantly, youth unemployment in Nepal is at an all-time high. We are losing a large chunk of our labor force, during its prime and most productive years, to some other country due to lack of a better opportunity here at home which is a big shame. Most youths going overseas for jobs are rural youths involved in agriculture. These youths leave Nepal because they lack the necessary skills and education to become employed in other sectors in Nepal. The best and the easiest way to stop this mass exodus is to initiate a nationwide program to educate the youth who will be able to seek employment in sectors other than agriculture.
Therefore, we should encourage our youths to finish school, and go to college. If they cannot afford to do so, the government needs to step-up and provide then with benefits, subsidies and, if need be, free education all the way until they finish college. Only then can we have educated youths capable of finding employment within the nation’s boundaries.
It is a wonder why our government mimics failed European tax policies, but not their successful and free college education policies? Our leaders, time and again, claim to turn Nepal into Singapore. Here’s my response to these leaders: if you can get our education system to mimic that of Sri Lanka, I’ll never ask you for a Singapore.
Along with education subsidies for youths, providing businesses with incentives, such as tax breaks and subsidies, to relocate them will help balance the unemployment figures nationally. Despite what we see in Kathmandu, where people from all over the country are flowing in for jobs, most of Nepal’s labor force is uncomfortable when it comes to moving and relocating for jobs. The government, via designed programs, should encourage the jobless to relocate to where the jobs are. People with little or no education should be provided with vocational training.
Finally, since most of the youths who go overseas for jobs, are engaged in construction jobs, we should provide such jobs at home while ensuring, at the same time, that we are also sending more of them to schools and colleges. Our roads and highways are crumbling and are also in need of widening; bridges are falling apart; and there aren’t enough roads and bridges to smoothen the trade flow. So, the best way to tackle Nepali unemployment is to engage in a highway construction effort in a scale that this country has never seen before. We have the necessary labor to do the job. All we need is the necessary capital which I am sure our friends at International Monetary Fund, Asian Development Bank, World Bank, India and China will be happy to help out.
Writer is an Economist at the Institute for Integrated Development Studies (IIDS)
There are three kinds of unemployment: structural, frictional, and cyclical. Frictional unemployment occurs when people move from one place to another or when they quit one job to find another. Cyclical unemployment occurs when people lose their jobs due to business-cycle fluctuations. It increases when an economy is in a decline. Structural unemployment occurs when the labor force lacks the necessary skills and training to make itself useful in the new way of doing things.
In Nepal, people from low-opportunity areas have always moved to areas where jobs are aplenty. Also, a dearth of jobs means quitting one to find another has not been a luxury available to Nepali workers. So, frictional unemployment isn’t really a big issue for us. Also, the Nepali economy has been growing steadily at around 3 percent a year. We are not in a recession, and thus, we should not worry too much about cyclical unemployment.
Financial sector, however, has been flying high in Nepal. Despite what we believe, private education in Nepal has become an industry in itself and has been growing rapidly all over the country. The construction sector is also booming. But, manufacturing industry is in the dumps, and agricultural production is also in decline. This has resulted in an increase in net unemployment because the declining effects far outweigh the positive effects. Manufacturing and agricultural labor force in Nepal lacks the necessary training and skills to succeed in construction, education or financial sectors. This lack of transferable skills among the labor from different sectors has resulted in growing structural unemployment in Nepal.
Growth in financial and banking sector has resulted in lots of jobs. Education and housing industry boom has given jobs to thousands. Manufacturing industry, which depends on huge amounts of energy for production, has been severely handicapped due to load-shedding and lack of alternative energy options. Competition from other countries along with lower returns has, all but, destroyed the agricultural industry which, according to the latest National Labor Force Survey, still employs around 51 percent of the labor force. In comparison, the construction and financial industries, which are booming, each employ only about 1 percent of the entire labor force.
The solution, currently in use and promoted by our government, has been to send these low-skilled laborers abroad for jobs. While remittance money from overseas workers has been helping us in the short-run to fulfill our consumption desires, it is not a viable option in the long-run. Studies in many nations that faces employment migration have shown, repeatedly, that remittance does not create jobs and has no contribution in reducing inequality. Our policymakers seem oblivious to this fact, seeing how they have been going about their business of signing agreements with other nations to send our labor force overseas for jobs.
What, then, is the solution? We know that agriculture can no longer remain our number one industry. As in all other nations that have developed before us, other sectors are bound to surpass agriculture as our leading contributor to GDP. However, we should not give up on agriculture right away because it still employs the largest share of our labor force. We should design programs to reform agriculture; provide technical support to farmers; provide healthcare; improve irrigation facilities; introduce scientific farming techniques, for example, drip irrigation; and provide storage facilities to farmers. Agriculture in Nepal cannot sustain itself without government intervention and reforms As this industry is too huge to sustain itself via individual efforts from farmers.
More importantly, youth unemployment in Nepal is at an all-time high. We are losing a large chunk of our labor force, during its prime and most productive years, to some other country due to lack of a better opportunity here at home which is a big shame. Most youths going overseas for jobs are rural youths involved in agriculture. These youths leave Nepal because they lack the necessary skills and education to become employed in other sectors in Nepal. The best and the easiest way to stop this mass exodus is to initiate a nationwide program to educate the youth who will be able to seek employment in sectors other than agriculture.
Therefore, we should encourage our youths to finish school, and go to college. If they cannot afford to do so, the government needs to step-up and provide then with benefits, subsidies and, if need be, free education all the way until they finish college. Only then can we have educated youths capable of finding employment within the nation’s boundaries.
It is a wonder why our government mimics failed European tax policies, but not their successful and free college education policies? Our leaders, time and again, claim to turn Nepal into Singapore. Here’s my response to these leaders: if you can get our education system to mimic that of Sri Lanka, I’ll never ask you for a Singapore.
Along with education subsidies for youths, providing businesses with incentives, such as tax breaks and subsidies, to relocate them will help balance the unemployment figures nationally. Despite what we see in Kathmandu, where people from all over the country are flowing in for jobs, most of Nepal’s labor force is uncomfortable when it comes to moving and relocating for jobs. The government, via designed programs, should encourage the jobless to relocate to where the jobs are. People with little or no education should be provided with vocational training.
Finally, since most of the youths who go overseas for jobs, are engaged in construction jobs, we should provide such jobs at home while ensuring, at the same time, that we are also sending more of them to schools and colleges. Our roads and highways are crumbling and are also in need of widening; bridges are falling apart; and there aren’t enough roads and bridges to smoothen the trade flow. So, the best way to tackle Nepali unemployment is to engage in a highway construction effort in a scale that this country has never seen before. We have the necessary labor to do the job. All we need is the necessary capital which I am sure our friends at International Monetary Fund, Asian Development Bank, World Bank, India and China will be happy to help out.
Writer is an Economist at the Institute for Integrated Development Studies (IIDS)
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