A latest report says Nepal may face shortage of 3.6 million workers by 2030 if people continue to take up jobs in foreign countries at the current pace. The projection was made on the basis of supply and demand of labourers in the coming years, and past economic and labour productivity growth rates. This forecast is not favourable for a country which is gearing up to become a middle-income economy by 2030.

 

The good news is that labour outmigration has dropped for three consecutive years, and the number of outbound workers is expected to further decline during this fiscal year. But the bad news is that Nepal will face a labour deficit of around 600,000 by 2030 even if outmigration comes to a halt and economic and labour productivity growth rates remain at today’s level, according to the report prepared by Overseas Development Institute (ODI), a UK-based think tank, and Nepal-based South Asia Watch on Trade, Economics and Environment (Sawtee).

 

This implies that the problem of labour shortage in Nepal, which is already facing dearth of agricultural and construction workers, will deepen in coming years. This will put Nepal’s plan to transform into a middle income economy by 2030 at stake.

 

One of the determining factors for Nepal’s entry into the club of middle-income countries is per capita income. A Nepali currently earns $862 on average per year. The government plans to raise that income level to $2,500 by 2030. But Nepal’s per capita income has gone up by around 2 percent on average per year in the last 45 years, which is the lowest in South Asia. If the average income of Nepalis continues to grow at this pace, Nepal’s transformation into a middle-income economy will remain a pipedream.

 

The only way to increase per capita income is to expand gross domestic product (GDP). To raise GDP, the government must formulate strategies to attract domestic and foreign investment. Once GDP starts growing, demand for workers may go up. This may put Nepal, which is already facing labour shortage, in a difficult position. To address this problem, strategies must be devised to give a lift to labour productivity and generate high productivity jobs. This will give a boost to aggregate wages and reduce labour outmigration, paving the way for country’s entry into the group of middle-income nations by 2030.

 

One of the biggest problems faced by Nepal at the moment is low labour productivity. The country’s labour productivity is one of the lowest in South Asia, meaning every worker here, on average, produces less goods and services than workers in other nations in the region. This is because of engagement of workers in subsistence agriculture. This calls for the need to design strategies to expedite transformation from low to high productivity economic activities.