Unemployment is one of the gravest problems of the Nepali economy. The gravity of the problem is reflected by the fact that the youth of working age group (15 to 24 years) is 20, 74,000 (69.1 percent of the total labour force), according to Labour Survey 2017/18. Even among these, the highest share - 38.1 per cent unemployment - is of the age group of 15 to 24 years. Likewise, 31.1 per cent of the youth of 25 to 34 year age group is unemployed. Due to the lack of skill and experience in this age group, foreign employment has been the only alternative open to them. The number of youths taking permission for foreign employment has been increasing every year. The growth rate of GDP, resulting in more employment opportunities, is below 2 per cent per annum at present. Hence, creating employment opportunities needs to be assigned the highest priority in any development strategy.

There are so many causes of youth unemployment. There is no adequate employment generation due to the slow growth of the non-agriculture sector, particularly the manufacturing sector, and the lack of modernisation of the agriculture sector. Unemployment among youth is also due to the inappropriate educational systems lacking technical and vocational skill. The reluctance of educated youth to undertake self-employed entrepreneurial jobs has been instrumental in causing educated unemployment. According to Chandra Dhakal, president of FNCCI, “Our labour market is experiencing two types of problems simultaneously – on the one hand the employers are seeking skilled labourers; on the other, unskilled labourers are seeking employment." This is called ‘square peg in the round hole’ syndrome.

Demographic dividend

Although the government has adopted a policy of ‘Prime Minister Employment Programme”, aimed at creating employment opportunity within the country by making the labour force skilled and professional, there is no corresponding programme to achieve the goal. The economists talk of Demographic Dividend, meaning a phenomenon having the potential for high economic growth when the share of the working-age population (15-64 years) in total population is higher than the non-working age group. However, Nepal has not been able reap the population dividend except receiving remittance.

The Economic Survey every year predicts the expected employment generation from the increased foreign investment but is never realised in practice. The increase in the rate of investment leading to the increase in economic growth helps to increase employment opportunity. However, the growth rate of GDP in 2023/24 was extremely low – below 2 per cent per annum – causing more unemployment of the youth. At present, policy instability created by political instability has been a stumbling block in increasing investment so as to make the industrial sector a major employment generating sector.

Experts warn that if unemployment persists, these disillusioned people can become a potential danger to political stability, being highly susceptible to subversive elements in society. However, tackling youth unemployment immediately as a quick fix is an uphill task. Nevertheless, the government can devise viable strategies to minimise the problem. Till today the agriculture sector has been the backbone of the economy, contributing 24 percent to GDP. Since agriculture is the main occupation and livelihood of about 62 per cent of households, modernisation of agriculture is an effective way to promote employment and raise income of the masses. This is the sector which alone can widen the market and strengthen the base for industrialisation. This necessitates various programmes to raise agriculture productivity.

The second important strategy is to initiate rapid industrialisation with emphasis on both large and small-scale industries. At present the contribution of the industry sector to GDP is about 14 percent and of manufacturing industry is mere 5.16 per cent. It is essential to develop large-scale industries for harnessing the increasingly redundant labour force with stress on the development of the agro-based industries which will strengthen the agriculture sector leading to the promotion of employment opportunities. In a country where capital is scarce and labour plenty, development of small industry, as it is said ‘small is beautiful’, is most viable. But care should be taken to adapt traditional skills and products to changing market needs.

Educated unemployment

The critical role of education in increasing employment opportunity and raising productivity can hardly be underestimated. The manpower, products of liberal education, has so far produced only what economists call ‘the square peg in the round holes’, leading to educated unemployment. One of the causes of unemployment is the maladjustment between the products of the educational system and the needs of the economy. Hence, measures should be taken to reform the educational system that ensures employment. An ILO report underlines the need of imparting employment-oriented education to the youths rather than bookish education to stop youth from falling into the sea of frustration.

Economists opine that, since of all the resources, human resource is the most precious source of development, the nation should accord topmost priority to the proper utilisation of its human resource. Because the human resource, which is the most powerful source of development, is also bound to be a constant source of poverty, misery and instability if not properly managed. Hence, it is high time on the part of the government to take up the problem of unemployment seriously.

Published on: 5 August 2024 | The Rising Nepal