When considering development, labour is both the means and the end. The level of employment in Nepal is extremely positive with the reportedly the lowest unemployment rate in 2017 standing at 3.2%. Paradoxically, and in the case of Nepal, low unemployment rates can disguise substantial levels of poverty.
This seemingly rosy statistic hides that only 4% of the economically active population work in the formal sector. The remaining 96% hence work in the informal sector; at risk, unprotected by labour laws, little job security and no health or pension schemes. Of the 500,000 workers that enter the labour market each year, 80% are absorbed by international demand. The remaining 20% find employment in low-quality jobs within the informal sector.
Furthermore, there is a considerable population of “discouraged workers”. These are labourers whom are not working and yet do not actively seek employment and thus are not accounted for in unemployment statistics. Reasons for this can be because of limited employment opportunities, restricted labour mobility and discriminatory cultural and social constructs. In the case of Nepal, such social barriers include gender and caste.
The comparatively higher wages, reduced levels of discrimination, better working conditions and standard of living all contribute to causes of out-migration of Nepalese labourers on such a large scale. For young high-potential labourers, there is a trend for Nepalese students to pursue degrees abroad and exploit the perceived world of opportunities that provide greater earning potential. Other Nepalese travel to places like Malaysia and Dubai to work in low paying but, relatively more lucrative roles such as cleaners or baristas. Many businesses in Nepal capitalise off the demand to move overseas. There are countless educational and international employment consultancies across Nepal offering services to find education and work opportunities for Nepalese.
These out-migration results in leakage of money from the Nepalese economy; whether to pay for tuition or accommodation. This contributes to the slow growth of the economy and damages the current account balance. Conversely, in the long term these workers inject money back into the economy in the form of remittance, that presently makes up 29% of GDP. To put this figure into perspective, the largest sector in Nepal, agriculture, accounts for 35% of GDP.
In 2009, in pursuit of more remittance, the Ministry of Labour and Transport Managements (MoLTM) adopted an aggressive strategy to promote the Nepali labour market abroad. In the succeeding 10 years, more Nepalese than ever have made the move and it is estimated that between 3.5 and 4 million are currently abroad. To extrapolate this trend forward, a report has claimed that by 2030, Nepal is expected to suffer a 3.6-million-person shortfall in labour requirements. This would hamper growth and in turn development seriously.
In addition, labour productivity growth has slowed in recent years, in comparison to other Asian countries reaching an average of 5.8% labour productivity growth between the years 2002 and 2013, Nepal lags. Data implies that the fastest growing sectors are those that are more capital intensive and have high labour productivity, such as finance, transport and real estate. Then the slowest growing industries namely agriculture, manufacturing and hospitality are among the most labour intensive and least productive.
To help labour retention, the Nepalese government need to create jobs in growing sectors to drive up labour productivity. An ODI report highlighted four sound sectors of focus. Concentrating efforts of job growth in Agro-processing and light manufacturing; information and communication technology; tourism and hydropower sectors will reap the highest and most sustainable growth rewards. Creating long-lasting and opportunity rich work.
Secondly, the proportion of discouraged workers needs to be address in order to utilise as much of the labour force as possible to stimulate productivity and growth. The government need to stimulate female empowerment from the top down and address all discrimination towards women and lower-class citizens. Overtime attitudes will change, but with support from government this will occur immeasurably faster and the resulting benefits will bring value to all members of society alike.