Nepal will continue to lumber in what economists call ‘jobless growth’ if it fails to rethink on its growth strategy that has so far failed to address problems faced by underemployed people and those engaged in vulnerable and low-paid jobs, a latest report says.

During the period from 2000 to 2012, Nepal’s employment growth stood at 2.7 per cent per annum — a rate which surpasses the average population growth rate of 1.7 per cent, but well below Nepal’s average GDP growth rate of four per cent in that period, says the latest United Nations Conference on Trade and Development (UNCTAD) report released today, terming those years as a period of ‘jobless growth’.

“There should, therefore, be greater policy emphasis on employment generation as a central development objective. Otherwise, international migration or social and political instability may rise,” says the Least Developed Countries Report 2013, titled ‘Growth with Employment for Inclusive and Sustainable Development’.

Currently, around 550,000 youths enter the job market every year, up from 524,900 in 2010. Of this number, around 400,000 accept placements abroad every year. This implies very little jobs are being created in the country. This situation does not bode well for the country, as creation of decent jobs in sufficient quantity is essential for sustained economic growth.

This situation is, unfortunately, accompanied by the presence of low productive labour force, which has further complicated problems.

The report says Nepal is one of the few countries where bulk of the growth per capita was accounted for by changes in the share of population of working age, or demographic structure, as against output per worker in other least developed countries (LDCs). One of the problems faced by Nepal is relatively slow structural transformation, meaning new economic activities with higher productivity failed to crop up.

As a result, agriculture, mostly subsistence farming, accounted for 71 per cent in 2013, slightly down from 75 per cent in 2000. Industry, on the other hand, accounted for 12 per cent of Nepal’s total employment in 2013, an increase of two percentage points over the figure in 2000. 

Services accounted for 17 per cent of employment in 2013, also increasing its share in total employment by two percentage points. “These figures show that structural transformation has been relatively slow in Nepal,” says the report.

However, the report acknowledges the recent pattern of structural change in the least developed countries, like Nepal, has been disappointing in terms of employment creation and inclusive growth, as it has resulted in a process whereby a labourer is released from low-productivity activities, mostly rural, only to be underemployed in other low-productivity activities — mostly, but not exclusively, urban, and in the informal sector.

“This shift of workers from one type of low-productivity activities to another explains why income poverty is so prevalent in many LDCs, and why vulnerable employment accounts for around 80 per cent of total employment,” says the report.

Despite the pitfall, the report acknowledges the need for structural change. The report further says such a structural change should ideally be led by the consolidation and expansion of the modernising core of the economy, composed of high-value added, knowledge-intensive and competitive activities in manufacturing, mining, mechanised agriculture and modern services. “In terms of labour, structural change should ideally result in a transfer of workers from low-productivity, poorly paid work to more productive and better employment in other sectors,” adds the report.

This change is critical for Nepal as the number of youths expected to join the jobs market per year is expected to top 633,000 by 2020.

Quick Facts

Labour participation rate aged 15+

• Female 80.4pc

• Male 87.6pc

• Total 83.9pc

New entrants in labour market

• 2010 524,900

• 2020 633,000

• 2030 554,400

• 2050 488,400

Published on: 13 February 2014 | The Himalayan Times