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VOL. 28, NO. 22, Feb 20, 2009 (Falgun 09 2065)
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Unemployment in South Asia: A case of Nepal
By Professor Bishwambher Pyakuryal, Ph.D.
Nepal Scenario
In Nepal, the working age group population of 15 to 59 years has increased from around 9.6 million in 1991 to 12.3 million in 2001 Census with an average annual growth rate of around 2.5 per cent just higher than the average annual population growth rate of the same period. Youth between the ages 15-29 years represent almost 25 per cent of the total population and 13.6 per cent of the total labor force (only 13 per cent from this group live in urban area indicating high underemployment in rural areas).
According to Nepal Living Standard Survey II, 2003-04 conducted by Central Bureau of Statistics, the unemployment rate among 15-24 years old remains to 6 per cent and incidence of child labor is estimated to be 31 per cent among 5-14 age groups. The government should immediately formulate labor support policies by addressing different vulnerable age-groups especially the young populations. These youths are the product of national politics since they are undereducated, frustrated, restless, unhappy, sad, angry and disconnected from society's mainstream.
Labor productivity depends on the quality of labor, which ultimately depends on literacy rate. Nepal Labor Force Survey 1998/99 conducted by CBS depicts that around 40% of the population of 20-24 age group are illiterate and 86% of the same age group are in labor force. Similarly, around 50% of the population of 24-29 age groups is illiterate and 91% of the same groups are in the labor force. Since illiterate labor force does not find job outside agriculture, majority of them are engaged in agriculture with low productivity indicating that they are poor and can not impart education to their children.
Significant per cent of the total population falls under the productive age group. For example, 60 per cent of the total population is below 40 years age. The country has not been able to tap this vast labor force with tremendous production potential. It is sad to note that the employment dimension of poverty alleviation strategy has received inadequate attention even in the Tenth Plan document.
In last four decades Nepal's per capita income grew from US $130 in 1965 to about US $240 at present. This growth is merely 1.7 per cent per annum in per capita incomes, which is the lowest in South Asia. Given the current trend of fertility decline (Total Fertility Rate is 3.7 births per women, HDR, 2005), the population is expected to grow to 77 million in the next four decades (WB, 2004: Nepal Development Policy Review, Restarting Growth and Poverty Reduction) contributing to much faster growth in the demands for jobs.
The present growth of TFR will also put pressures on land resources weakening the employment, growth and poverty reduction prospects. ADB's publication of the Asian Development Outlook 2006 estimates that agricultural growth in Nepal will be pulled down to 1.5 per cent in 2006 by weather related decline in both winter and summer crops. Given the good weather condition and sustainable peace, it can be hoped that agricultural growth will pick up to 3.5 per cent in 2007. The growth of manufacturing sector, which remained barely 2.15 per cent in FY 2005, was also discouraging.
The statistics shows that incidence of poverty has come down from 42 per cent in 1995-96 to 31 per cent in 2003-04, a decline of almost 11 percentage points. The eight year period between two surveys experienced almost 5 per cent GDP growth, 3.7 per cent of the annual agricultural growth, growth in manufacturing and also the growth from remittances, which was 12.4 per cent of the GDP (NLSS-II 2003-04). This was the reason for the reduction in the incidence of poverty. The situation is different now. There has been continued decline in all the fronts except in remittance earnings, which also is declining globally.
The Tenth Plan is total failure in terms of bridging up higher level of income inequality. According to NLSS-II, the Gini coefficients have increased from 34.2 in 196-97 to 41.4 in 2003-04. To address these complexities the new government including the Maoists party should seriously consider combining human poverty index (HPI) such as a short life, lack of education, and lack of access to public and private resources in a single poverty index as a useful method to capture the totality of human poverty as opposed to the conventional method of measuring poverty by income alone.
The data reveals (NLSS-II 2003-04) 75 per cent of the population in the richest quintile is literate while only 25 per cent is literate in the poorest quintile. This indicates strong association between literacy rate and per capita household consumption. Comparable South Asian literacy rate also indicates that current status of educational achievements is unsatisfactory.
NLSS-II 2003-04 shows, overall, agriculture constitutes 37 per cent of the wage employment, the rest in non-agriculture. Table 3 in Volume II of the report indicates huge gender gap between the sectors. The non-agriculture sector employs 72 per cent of male wage earners while female wage earners constitute 36 per cent which reiterates the need for developing pro-poor and gender-oriented employment policies. The reason the present structure of sector-specific employment is important from policy perspective is because prevailing wage rate creates large income disparity between the sectors. Overall, average agriculture nominal daily wages are Rs. 75 in total whereas non-agriculture daily wages Rs. 133 (Table 13.5 of the report). This problem is exaggerated by the fact that there are noticeable gender differences in daily wages and gap between the rural and urban areas is also very high.
Recommendations
As several studies show investment in human capital has large payoffs for individuals and aggregate economy, education and capacity-building should be made an integral part of long-run policy. The policy to find job for the displaced workers is preferable to providing income support because these workers can earn more by working than by not working. Government's assistance in running the worker's own business becomes more effective after the individuals are imparted trainings. This opportunity may create environment for investing surplus fund from remittances. In case of Nepal, a note on the website of NepalNet states that remittances constitute about 50 per cent of foreign exchange earnings and 13 per cent of GDP. The estimates according to the report, is based on the number of labor migrants both legal and illegal and the average wages and remittances sent home. At a time when economic slowdown has contributed to the closure of hundreds of manufacturing units, carpet and garment industries and also potential service sector in countries like Nepal, the new hope for economic rehabilitation through remittance economy needs to be fully explored.
A vast majority of young men and women get insecure and low-paid job. The disadvantages realized by young women in labor market are greater. This is a group that spends less as a consumer and also save less who do not make any investment. The change in the mind set of the policy makers is essential not to see these young entrants into the labor market as a problem. They could be taken as a partner of economic and social development. The policy should thus be to seek their opinion about their potentiality and preferences rather than to imposing 'what is the best' to them.
