REPORT BRIEF YOUTH EMPLOYMENT IN NEPAL P romoting the smooth integration of workers into the workers under bilateral labor agreements between Nepal and labor market and ensuring their early success has destination countries. The report seeks to present insights increasingly emerged as an important economic and and implications for research and public policy, with the social development goal around the globe. Many low-income goal of improving the labor prospects of Nepalese youth. countries, including Nepal, are in the middle of a youth bulge in their demographic structure. In addition, today’s youth Youth are defined as individuals ages 16–34 years. The are, on average, more educated than past generations. These definition largely overlaps with Nepal’s official definition dynamics present real opportunities for Nepal’s economic (ages 16–40 years), is consistent with the “extended youth” growth and development. Nepal also faces risks from failing definition applied in other research internationally, and is to provide sufficient, suitable employment that is productive appropriate given that sizeable shares of men and women and remunerative for the country’s youth. ages 15–24 years (24 percent and 17 percent, respectively, in 2010–11) are still attending education institutions. Because The Nepal government sees addressing the social and Nepalese law considers individuals as children at 15 years, economic challenges of youth, and leveraging their social the minimum age for youth is set at 16 years. and economic prospects, as critical for the country’s economic growth and development. This priority is reflected, for example, in the government’s latest national economic REPORT STRUCTURE program document, the 14th Periodic Plan, and the Youth The report comprises five main chapters. Vision 2025 and Ten-Year Strategic Plan and National Youth Policy. 1. Youth Sensitivity of Labor Laws and Policies examines Nepal’s labor laws and policies in terms of whether and to The report Youth Employment in Nepal aims to improve what extent they cover youth labor issues and interests. our understanding of the labor market conditions, behaviors, and outcomes of Nepalese youth. It examines these issues 2. A Profile of Youth in the Domestic Labor Market exam- for Nepal’s domestic labor as well as in relation to labor ines how youth fare in the domestic labor market, mainly migration by Nepalese youth to India and other countries, based on Nepal Living Standards Survey (NLSS) data. including the temporary “foreign employment” of Nepalese 3. Labor Market Perceptions and Sentiments among b. a decline in the share of workers who are self-employed Youth Workers examines the views of employed and in agriculture and an increase in the share who are self- unemployed workers ages 16–29 years towards their or wage-employed in nonagricultural sectors. labor decisions and outcomes, based on 2013 Nepal School-to-Work Transition Survey data Three major shifts in labor patterns are documented among youth in rural areas: 4. Youth Labor Migration examines internal and external labor migration by Nepalese youth, based on NLSS a. a decline in the employment rate for women; data and employment permit data from the Nepal b. a decline in average hours worked by female and male Government’s Department of Foreign Employment. workers; and 5. Youth Labor Skill Training examines formal off-the-job c. an increase in real hourly earnings for male wage training for youth, mainly based on 2008 Nepal Labour workers in agriculture. Force Survey data. Such training involves short courses or vocational education tracks that confer a Technical Annual wage statistics corroborate the labor earnings School Leaving Certificate or a technical diploma. trends for Nepal, showing that agricultural workers have experienced the largest real gains in wages, whereas salaried workers essentially have experienced no real gains MAIN FINDINGS (figure 1). Given that salaried workers tend to be more educated than wage workers, real labor-earnings returns YOUTH SENSITIVITY OF LABOR LAWS AND POLICIES to education appear to be declining. The evidence suggests Nepal’s labor laws and policies have largely failed to that the demand for more-educated workers is not keeping influence the labor decisions and outcomes of youth or older up with the increase in supply. individuals because of poor implementation, stemming from weak government commitment and capacity. With FIGURE 1 the exception of civil and armed services recruitment rules, Evolution of Salary and Wage Indexes labor laws generally do not include special provisions for youth. 500 Government policies on domestic employment, foreign employment, and training tend to focus on or prioritize youth. 400 The policies set ambitious targets for youth employment, but these targets often are not based on sound estimations Index value or predictions using suitable data. The government also 300 does not have in place the organizational arrangements, operational plans, or resources needed to meet these targets. 200 A PROFILE OF YOUTH IN THE DOMESTIC LABOR MARKET Youth unemployment and time-related underemployment 100 2004/05 2006/07 2008/09 2010/11 2012/13 2014/15 rates tend to be low. An analysis of trends between 2003–04 Year and 2010–11 indicates two major shifts in labor patterns for Consumer price index Salary index youth in general: Wage index Agriculture wage index Source: Statistics obtained from the Government of Nepal's Economic a. an increase in the share of youth attending school, Surveys for the various fiscal years. which indicates more years of schooling and thus later entry into the labor market; and Note: The base year for all indexes is 2004/05. 2 LABOR MARKET PERCEPTIONS AND SENTIMENTS employment, mainly to find work that has better conditions, AMONG YOUTH WORKERS offers more hours, or better matches their qualifications. Most employed workers found their employment by Unemployed workers underwent longer searches to find either joining their family’s income-generating activity or employment and are more likely than employed workers to asking friends or family for assistance. The majority of have refused employment offers. The main reason unem- employed workers say their qualifications are relevant, ployed workers give for turning down an offer is low wages. but a sizeable minority believe that they need additional Similar to employed workers, most unemployed workers education or training. report that the main difficulty they face in finding employ- ment is either insufficient employment opportunities or Most employed workers report that their main difficulty in inadequate qualifications. Nepalese unemployed workers are finding employment is either insufficient employment oppor- more likely to report insufficient employment opportunities tunities or inadequate qualifications. In rural areas, wage than their counterparts in other countries with comparable workers are more likely to report insufficient employment data (figure 3). Within Nepal, more-educated, unemployed opportunities, whereas unpaid family workers are more workers are more likely to report insufficient employment likely to report inadequate qualifications. Most workers are opportunities. dissatisfied with their employment, at a rate that is much higher than for workers in other countries with comparable data (figure 2). A large share of workers desire to change FIGURE 2 Comparison of Sentiments and Opinions of Employed Worker Ages 15–29 Years, Nepal Versus Other Countries 100 90 81 81 80 74 60 Percent 45 41 42 40 31 26 28 20 20 15 13 9 10 10 7 6 7 7 5 5 7 4 2 0 Employment Desire to change Reason behind desire: Reason behind desire: Reason behind desire: satisfaction employment better match with improve working more work hours education qualifications conditions Bangladesh (2013) Cambodia (2012) Nepal (2013) Samoa (2012) Vietnam (2012–13) Source: Based on statistics drawn from Elder, Sara. 2014. Labour Market Transitions of Young Women and Men in Asia and the Pacific. Work4Youth Publication 19. Geneva: International Labour Office. 3 FIGURE 3 Comparison of Sentiments and Opinions of Unemployed Workers Ages 15–29 Years, Nepal Versus Other Countries 100 80 63 60 52 Percent 45 43 40 32 31 25 23 17 17 15 20 14 7 7 8 8 6 0 Search length: 1 year+ Preferred employment: Main difficulty finding Main difficulty finding public sector employment: insufficient employment: inadequate opportunities qualifications Bangladesh (2013) Cambodia (2012) Nepal (2013) Samoa (2012) Vietnam (2012–13) Source: Based on statistics drawn from Elder, Sara. 2014. Labour Market Transitions of Young Women and Men in Asia and the Pacific. Work4Youth Publication 19. Geneva: International Labour Office. YOUTH LABOR MIGRATION FIGURE 4 The extent of labor migration by Nepalese youth is so Share of Households That Report Receiving Remittances, large that it deserves special attention within the broader Nepal Versus Other South Asian Countries discussion of Nepal’s youth employment. One-third of 50 households in Nepal report receiving remittances from members who have migrated—a very large share compared 40 to other South Asian countries (figure 4). 33 34 29 30 Youth labor migration is male dominated. Male youth labor Percent 23 22 outmigration rates are highest from rural Terai, rural Hill, 21 19 20 and Mountain regions (figure 5). Most female youth labor 15 14 16 14 13 migrants move within Nepal, whereas most male youth 10 labor migrants go to other countries (figure 6). Irrespective of gender, most youth migrants appear to be wage-employed, 0 particularly when they go to other countries, and to engage Bangladesh Nepal Pakistan Sri-Lanka (2009–10) (2010–11) (2013–14) (2009–10) in services. Country (Year) Labor migration is positively associated with education All Urban Rural attainment for women, but negatively associated for men. Source: Estimated using data from the 2009–10 Bangladesh Household Labor migration is also positively associated with household Income and Expenditure Survey, the 2010–11 Nepal Living Standards economic status for women. Survey, the 2013–14 Pakistan Household Income and Expenditure Survey and the 2009–10 Sri Lanka Household Income and Expenditure Survey. 4 FIGURE 5 FIGURE 6 Share of Youth Who Have Migrated for Labor, Distribution of Male and Female Youth Labor Migration, by Home Region, 2010–11 by Destination Type, 2010–11 50 50 39 40 40 36 35 35 33 32 30 30 27 27 Percent Percent 24 24 23 20 20 12 10 10 10 6 7 5 5 4 3 3 0 0 Kathmandu Urban Rural Mountains Urban Rural Internal, Internal, External, External, Internal, Internal, External, External, rural urban India other rural urban India other Valley Hills Hills Terai Terai Female Male Region Gender and destination type Female Male Source: Estimated using data from the 2010–11 Nepal Living Standards Source: Estimated using data from the 2010–11 Nepal Living Standards Survey (NLSS). Survey (NLSS). Note: A youth labor migrant is defined as an individual ages 16–34 years Note: A youth labor migrant is defined as an individual ages 16–34 years who is absent from the household for labor reasons at the time the 2010– who is absent from the household for labor reasons at the time the 2010– 11 NLSS was administered to the household and who has the intention to 11 NLSS was administered to the household and who has the intention to return as reported by the household. return as reported by the household. Foreign employment workers from Nepal primarily go to Training rates are higher for urban than for rural residents, Malaysia, Qatar, Saudi Arabia, and the United Arab Emirates. and for individuals who have obtained at least a School Foreign employment outflow appears to be mainly influenced Leaving Certificate. Differences in training rates are small by economic and other forces in destination countries, between women and men, but large among regions in rather than by factors in Nepal. Nepal’s foreign employment Nepal. Training tends to be short-term, with basic computing system faces several challenges, including implementation and dressmaking and tailoring the most popular fields for shortcomings in the government’s institutional arrangements women, and basic computing the most popular for men. for workers, and the substantial market power of private Youth training recipients tend to be on the older end of the recruitment agencies in Nepal over workers. 16–34 years age range, better educated, and more likely to be attending school. They also tend to come from wealthier Male youth labor migration appears to have a negative households and traditionally advantaged ethnic or caste effect on the likelihood of employment and hours worked communities, especially for those who received training in for both female and male youth household members. basic computing. Returned youth labor migrants from external destinations other than India appear to have poorer labor outcomes than Training is associated with higher likelihoods of employment, youth nonmigrants. wage work, and nonfarm work for women. For men, training does not appear to be associated with the likelihood YOUTH LABOR SKILL TRAINING of employment, wage work, or nonfarm work. In general, training does not appear to be associated with wage earnings In 2008, 10 percent of youth had received training at some for either gender. point—a relatively high rate among South Asian countries (figure 7). 5 FIGURE 7 Training Rates for Nepal Versus Other South Asian Countries, Individuals Ages 16–34 Years 25 21 20 20 19 15 Percent 11 10 10 9 9 9 8 8 8 8 7 6 6 5 5 3 3 2 1 0 Rural, Rural, Urban, Urban, All female male female male Bangladesh (2013) India (2009–10) Nepal (2008) Pakistan (2012–13) Source: Estimated using labor force survey data for Nepal (2008), Bangladesh (2013), and Pakistan (2012–13), and data from India's National Sample Survey 66th round (2009–10). In 2008, 40 percent said they would like to obtain training, a. Evolution of female labor force participation in rural areas with interest especially high among youth outside the Kathmandu Valley region. Women express the most interest b. Employment search and worker-employment match in training in the fields of dressmaking and tailoring and process basic computing, whereas men are mostly interested in c. Labor productivity basic computing. Although wealthier youth tend to have higher rates of training, interest in training is higher among d. Worker preferences for employment less wealthy youth. Interest in training is also higher among those who have previously received training and among e. Gains and costs of internal and external migration those who are already employed. f. Organization and functioning of the foreign-employment recruitment market DIRECTIONS FOR FUTURE RESEARCH g. Structure and functioning of training programs, includ- The analysis and findings indicate several potential areas for ing on-the-job training further data collection and research on Nepal’s youth labor h. Interplay between public and private labor markets market. These include: 6 DIRECTIONS FOR POLICY The government also provides little support to help labor migrants returning from other countries integrate into The findings point to three directions for orienting public Nepal’s labor market so as to generate not only significant policies and programs. private labor returns for returning migrants but also positive First, raise rural labor productivity, urban labor demand, labor market spillovers (that is, employment creation or and urban worker-job matching efficiency. Documented earnings gain for other individuals). Evidence suggests that youth labor market trends and patterns suggest large returning youth labor migrants are more likely than youth adjustments have taken place in rural labor markets due to nonmigrants to engage in agriculture. Thus, the former may labor supply shifts and depressed labor demand in urban be an important target group for the government’s intent to markets, particularly for more-educated workers. In rural modernize agriculture. Strategies are needed to help both labor markets, rising wage earnings appear to mainly reflect rural-urban and returning labor migrants integrate into the falling labor supply rather than rising labor productivity. labor market in a way that is more effective and efficient. Strategies are needed to: Third, improve the orientation and efficacy of labor skill training. Strategies are needed to widen and enhance the a. raise labor productivity in agriculture and rural potential labor market gains from skill training, and to agribusiness; strengthen the quality and relevance of training delivered by private and public providers. b. improve the employment search and matching process for workers; and Evidence suggests strong demand exists for skill upgrading. Workers who are already employed—specifically, women c. spur labor demand by employers—for example, by in all sectors and men in agriculture—express a higher addressing any policy distortions that depress output of desire for training. Past training recipients express a higher and employment in firms. desire for further training in the same fields. Relatively Second, support the labor market integration of rural poorer households and households in regions outside of youth migrating to urban parts of Nepal and of youth labor Kathmandu Valley also express a higher desire for training. migrants returning from India and other countries. Although In line with this evidence, strategies are needed to better rural-urban labor migration is important, little government match training supply to demand.  support is available to help prospective labor migrants from rural areas find appropriate employment in the Kathmandu Valley region or other urban areas. At present, most rural labor migrants find employment through informal personal networks or chance breaks. 7 FOR MORE INFORMATION, CONTACT Dhushyanth Raju at draju2@worldbank.org or Jasmine Rajbhandary at jrajbhandary@worldbank.org OPEN KNOWLEDGE REPOSITORY https://openknowledge.worldbank.org/ bitstream/handle/10986/29810/9781464812767. pdf?sequence=2&isAllowed=y Report ISBN: 978-1-4648-1276-7 Report SKU: 211276 EFI 32638 SEPTEMBER 2018