Nepal is passing through very critical times in its history. While most of today’s highlighted issues tend to be political, policy makers can ignore various economic challenges facing the country only at the cost of nation’s peril. Youth unemployment is one such problem. Inability to channelize this vital resource in productive undertakings not only retards the country’s economic progress but also leads to various social problems. Employment opportunities become vital for economic and social stability.
The Nepal Labor Force Survey, 2008 shows that of all age groups, unemployment is highest among the youth. To elaborate, 46 percent of Nepal’s youth labor force (in the 20-24 age group) is underutilized. In the last ten years, both rural and urban unemployment among youth have increased, the latter almost doubled from 7.6 percent to 13 percent. At the same time, the employment-to-population ratio has declined and the underemployment ratio has increased. Significant disguised unemployment and seasonal unemployment has been noted in the agricultural sector. Since agriculture employs more than 74 percent of our national labor force, unemployment there is a serious concern. Only 16 percent are employed in the service sector and a mere 10 percent are employed in the secondary sector. The challenge, then, is not just increasing the supply but also diversifying the scope of jobs.
Labor-based industrialization, rather than service sector expansion, is the better growth strategy for a developing nation. Industrial growth is accompanied by growth in the agricultural and service sectors simply because it requires inputs from the former and can produce capital machinery for both sectors. Service sector growth does not have such a multi-dimensional effect. This is precisely why the East Asian nations were so successful in achieving growth as well as poverty reduction while in India poverty and inequality still remain a real concern.
Industrialization requires a qualified workforce, which in turn, demands excellent education infrastructure and effective planning to produce not only skilled workers but also sought after workers. We already have plenty of university graduates without work and unemployment rate in Nepal is the highest among the educated class.
This is where we can learn from Germany. Germany has the lowest level of youth and overall unemployment across Europe and America. Even in today’s gloomy economic climate, it has maintained a positive growth rate and its economic fundamentals remain sound.
Germany is primarily an export-based manufacturing economy. Although it has very little raw materials of its own, it is still the world’s second largest exporter of largely engineering-based products like automobiles, chemicals and capital machinery. For producing high quality output, they need workers of equally sound quality. And to make that possible, Germans have an excellent system of vocational education. Out of five systems of schools, four are directly related to vocational training. After completing school and a few years of the compulsory apprenticeship program, the students go on to work in their respective vocational fields.
Only 11 percent of German students opt for a university program; the rest pick vocational training. Contrast that with Nepal where only 7 percent of the total labor force has some form of vocational training and 88 percent of such workers have received training for less than 12 months. Instead of producing more jobless graduates, adding skilled labor power in the manufacturing sector can be a boost for both employment and the economy of Nepal.
The National Youth Policy, 2010 has recognized this and has placed special emphasis on entrepreneurship and vocational education. However, implementation seems to be severely deficient. The Youth Survey of Nepal, 2011 reported that vocational centers were inaccessible, they were rigged with nepotism, their quality was not up to the standard and the training duration was hardly sufficient. More importantly, job trainings were not demand-oriented and most of them were unlikely to find jobs even after completing their education. The entire process requires revision and improvement. Still, providing education and training is not a sufficient condition for youth employment. At a time when investment growth rate is mere one percent and the manufacturing value added growth rate is almost negative, can the industrial sector guarantee jobs?
For starters, Nepal’s industrial growth prospect was not always this bleak. In fact, it was only after 2007 that the investment growth rate in the industrial sector declined dramatically (from around eight percent to two percent), which was when Nepal officially came out of the decade-long civil war. The coming of age of labor movements at the time meant that industries were faced with series of protests from workers nationwide, demanding better compensation and working conditions. This conflict between the workers and the management is undoubtedly one of the main reasons for the flailing state of Nepal’s secondary sector. Here again, Germany can give some insights.
Nepal has a lot to learn from Germany in terms of adding skilled labor force to its manufacturing sector.
Germany’s trade unions have some unique and important features. First, they are strictly apolitical and choose not to affiliate themselves with any political or religious party. Second, all workers of a particular industry belong to the same union, which gives them more bargaining power. Third, they choose to affect legislation so they fight against the government rather than bargaining with the business representatives, hence reforms are guaranteed from state level and there is less conflict between the industrialists and the workers. Finally, the unions, together with the industrialists, are responsible for deciding on the future outlook of the output/job market and recommend various job prospects to schools for the next 5-10 years, thus promoting a sense of harmony between the two. The coordinated effort of unions, industrialists and schools ensures better job prospects for students.
Although it is implausible to emulate Germany, which already has a strong manufacturing industry with a long history and strong reputation, given the immediate need to address the problem of youth unemployment in Nepal, it becomes vital that we take necessary steps and learn from the German experience as much as we can.
One must hunt in all jungles for wisdom for knowledge resides in every one of them. While Nepal might not have a strong industrial background like Germany, it can only serve the country to invest in diverse and quality human resource, to develop a sensible system of labor and union laws and to better plan and coordinate the labor resources to cater to future market needs.
It has been widely recognized the labor market in Nepal needs to be restructured. Perhaps a change in emphasis and mindset among all stakeholders is now imperative, and there is no better time to do so than in the present state of national transition.
The author is pursuing his Masters in Economics at Delhi’s Jawaharlal Nehru University