Unemployment, dependence on foreign employment, and a remittance-dependent economy are deepening a long-term structural crisis in Nepal. Unemployment is not just a labor market problem but is intertwined with the education system, industrialization, economic structure, and long-term development strategy. Our labor management and employment issues are a matter of national debate.

There is also a golden demographic opportunity for Nepal. However, this is not sustainable. The youth population will continue to decline within the next 14 years, and in the next 24 years, there will be more citizens over 50 in Nepal. According to the 2078 census, 66.09 percent of the population, or 19.6 million, is in the labor market. The youth age group of 16-40 years also accounts for 43.98 percent of the total population.

An average of about 544,000 new people are expected to enter the labor market in the decade starting from the fiscal year 2082/083. The median age of Nepalis in the current fiscal year is about 25 years, and the youth population will remain in the majority for the next 14 years. Nepal is under pressure to transform its economy and society within this time frame. Adjusting for the number of people leaving the labor force, 3.6 million new jobs will need to be created in the next 14 years.

According to the latest census, although the population above the age of 10 years engaged in economic activities is about 15 million, 9.26 million are engaged in domestic work. If this is removed, only 7.22 million are considered to be engaged in employment. According to the first economic census conducted in 2018, about 7.1 million people are associated with 923,356 industrial establishments. According to the economic census, the highest percentage, 53.94 percent, is employed in wholesale and retail trade. The main sectors of national production are industry and agriculture, which account for a total of 13.89 percent.

When comparing the period between 2008 and 2016, about 7.2 million people have migrated from the agricultural sector. While the second labor force survey conducted in 2008 showed the total number of people in employment to be about 11 million, the third labor force survey showed a total of 7.087 people in employment, so it can be estimated that 4.691 million people are either outside the labor force or engaged in foreign employment. During this period, about 299,000 additional jobs were created in the industry and about 550,000 in the service sector.   

Dutch disease problems such as declining productivity in agriculture and industry, unhealthy expansion of the service sector, imbalance in the financial sector, increase in consumption-based imports, increasing international trade deficit, and increased liquidity in the financial market have also appeared in Nepal.  Foreign employment has played an important role in Nepal's employment management due to unemployment, underemployment, and low wages within the country. Since 8,691,544 new and re-employment permits were issued between the fiscal year 2051/052 and the fiscal year 2081/082, there is no alternative to foreign employment unless there is progress in domestic employment. 

About 60.7 percent of Nepalis are employed in the informal sector.  Sectorally, 91.8 percent of informal workers are active in agriculture, 61.8 percent in industry, 56.3 percent in mining and quarrying, and about 51.5 percent in the service sector. There is a higher participation of male workers in the formal sector, while the participation of women in the informal sector is relatively higher. Women's labor participation has gradually increased for two decades and reached about 27.6 percent in 2024. This is because women are forced to work at low wages.

The lowest productivity in Nepal's labor market, where productivity is low, is in the agriculture sector. The reasons for this rate not increasing are the low use of new technology, the difficulty in obtaining loans due to high interest rates and difficult procedures despite increased financial access, and low investment.

On the other hand, the existence of an inactive labor force also means that the wage rate of workers is low. In the Kathmandu Valley and Pokhara, about 40 thousand rupees are required to live. In urban areas like Biratnagar, Janakpur, Bhairahawa, Butwal, Nepalgunj and Dhangadhi, around 30 thousand is required to live. In rural and hilly areas, around 18 thousand rupees are required to live a normal life.

Although an average of around 23 thousand 500 rupees is required for a minimum living, the monthly minimum wage has been fixed at 19 thousand 350 in coordination between the government, employers and workers. Since the wages for a normal living of workers are low, Nepali workers are being attracted to foreign employment rather than the domestic labor market.

The most important aspect of Nepal's labor market is to enter the phase of ensuring social security. The contribution-based social security implemented since 2075 has been gradually expanding its scope. Even workers from the formal and informal sectors who go for foreign employment have been included in the social security fund. Which has addressed all kinds of risks. Of the 678,659 people in the domestic labor market and 2,125,590 who have gone for foreign employment, they are affiliated with the fund. However, there is still no continuity. Most of those who go for foreign employment do not even know that they are registered with the fund.

The weakest aspect of our labor market is the lack of a labor-based information system with detailed data. The 50th National Problem Solving Committee meeting of the National Planning Commission had given the authority to build a labor market information system to the Ministry of Labor, Employment and Social Security. Despite studying the technical aspects of the system, it has not been built. The concerned ministry has not yet taken a decision on building the system.

Nepal's National Employment Policy, 2071 has become more like a labor policy than an employment policy. The implementation of this policy has not even been evaluated. The role of the private sector, which creates about 90 percent of employment, investment, industrial expansion and improvement in labor productivity have not been included. This has made it unclear how the provincial and local levels play a role in job creation.

The role of the private sector, which creates about 90 percent of employment, investment, industrial expansion and improvement in labor productivity are not included. This makes the role of the provincial and local levels in job creation unclear. The country's recent economic activities have encouraged the use of internal resources and means. But the country's economic activities seem to be dependent on import-based trade and the service sector. The contribution of agriculture to the gross domestic product has decreased from 35.3 percent in the fiscal year 2041/042 to 24.71 in the fiscal year 2080/081. The contribution of the service sector has increased unevenly from 46.1 in the fiscal year 2041/042 to 62.38 percent in the fiscal year 2080/081. The contribution of the industry sector has increased from 16.9 percent in the fiscal year 2041/042 to 12.91 in the fiscal year 2080/081.

Dutch disease problems such as declining productivity in agriculture and industry, unhealthy expansion of the service sector, imbalance in the financial sector, increase in consumption-based imports, widening international trade deficit, and increased liquidity in the financial market have also appeared in Nepal.

Structural deviations from the need for the economy to enter the service sector from agriculture and from industry to the service sector, and direct entry of the economy from agriculture into the service sector are not considered good from the perspective of balanced economic development. While there is a possibility of creating a large number of jobs in agriculture and industry, it seems that employment is starting to rely on the import-dependent service sector. The government is under pressure to create decent and productive jobs. The new government has the responsibility to create rapid economic growth and a large number of jobs in order to manage the recent political turmoil in a new and sophisticated way.

Looking at international experience, economic development and job creation can be taken together. Vietnam has significantly expanded the industrial and tourism sectors, reducing the unemployment rate to 2.2 percent and the poverty rate to 1.93 percent. Bangladesh has created over 4 million new jobs by expanding its garment industry. Rwanda has created around 7.5 million jobs in the non-agricultural sector alone by 2025 due to good governance. Koreans, who used to go abroad for work until the 1980s, are currently employing around 1.2 million foreign workers due to the extensive industrialization that took place in the 1990s.

Unemployment can be addressed in Nepal if employment can be increased by just 4 percent annually. Raising the contribution of the industrial sector to the GDP to 20 percent will add 300,000 jobs. Increasing agricultural productivity by around 14 percent can strengthen the rural economy and control forced labor migration. If small and medium-sized enterprises can be increased by around 25 percent in the productive sector, thousands of new businesses can be created and employment can be increased. If capital expenditure can be implemented at a level of 90 percent, an additional 100,000 jobs can be created.

For economic growth and broad employment creation, state investment and remittances should be of the nature of capital formation and increasing investment in agriculture and small and medium industries. To re-engage workers who have returned from foreign employment in economic activities, entrepreneurship development should be facilitated, employment-oriented services should be expanded, and concessional loans should be mobilized. Government policies and programs should be implemented to provide various tax exemptions and loans if investments are made in agriculture and industrial activities. The local level should be identified as an economic center and the necessary policy and legal foundations should be set. A structure should also be developed to market domestic products and discourage agricultural products from coming from abroad.

There is a possibility of creating a large number of jobs from the industrial sector. The state should take special initiatives to open industries by identifying the potential for domestic consumption and foreign exports. The Government of Nepal should not fail to provide long-term concessional loans according to the needs of the private sector. If the government can provide incentives for the next few decades by expanding industrial zones such as SEZs, investors can be further attracted.

If the state increases investment in labor-intensive industries such as textile manufacturing, food and herbal processing, and construction material production that have strong potential and provides necessary policy facilitation, it will not only create employment but also contribute to foreign exchange earnings. It is also relevant to make arrangements for simple and easy operation of information technology-related activities that provide employment and have the potential to earn foreign exchange.

If the local level formulates expansion plans for productive and employment-oriented agriculture, tourism, and industries and the provincial and federal levels provide financial and technical assistance, the economic capacity and productivity of the local level will increase. This can strengthen the local economy and reduce the imbalance in economic development.

This decade should be implemented by making a strategic plan with the objective of increasing national production and employment. No one has the right to delay the implementation of the Internal Employment Promotion Decade with strategic objectives. This decade should be implemented by making a strategic plan with the objective of increasing national production and employment. In addition, innovation, use of technology and research-based production development activities should also be included in this strategy.