Employment : Headway to Economic Transformation

( Case study of Nepal )
 

Baikuntha Pandey
Asst. Professor (TU),Nepal

 
 
Date : 2020/07/14

 
 
 Contents

1.Introduction
2.Employment and Developing Countries
3.Objectives of the Study
4.Methodology
5.Employment Challenges in Nepal
6.Ways to Generate Employment in Nepal :Employment Patriotism (EP)
7.Employment Model for the Developing Countries.
8. COVID-19 and Employment.
9. Conclusion and Recommendations.
10. Annexes
 1.Introduction

• Employment of human resources forges all dimensions of a

society and gives a new shape to it.
• The deficiency in aggregate demand is the host of almost all
economic problems.
• Aggregate demand can be maintained through proper income
and income can be generated from employment of domestic
human resources.
• Employment helps absorbing or utilizing physical as well as
natural resources.
• When the human resources is diverted to productive channels,
a nation’s economic transformation becomes obvious.
 2.Employment and Developing Countries

• Employment pushes the economy in an upward chain

by creating aggregate demand .
• The higher aggregate demand pushes industrial output
that again creates more demand.
• Employment leads improved welfare of the workers
and hence their productivity also will be improved due
to their ability to maintain esteemed living standard .
• But many developing countries have found to have
tended to neglect agriculture sector.
• Developing countries have no option but to
expand employment opportunities in the
agriculture sector.
• This can be done by adopting an agriculture
planning strategy
• Agriculture planning strategy has three vital
constituents : expanding area under
cultivation, technological progress and
institutional reforms .
• The cities need more schools, more hospitals, low cost housings,
wider roads and smooth drainage, uninterrupted clean drinking
water supplies, spacious parks and playground and assuring
security provisions etc.
• The villages need building of dams and irrigation
canals ,construction of road linking them to cities, schools and
colleges , hospitals ,electricity and water supply etc.
• Public work programs are highly labour intensive in nature and
leads directly to substantial increase in employment opportunities.
They help in allocating income in favour of the poor.
• Farmers who have undergone some technical trainings can be
encouraged to set up small –scale- enterprises on their own.
• Financial assistance and other various incentives in the form
of cheap raw material availability, knowledge about market
conditions, exemption from industrial licensing policy, tax
base etc can be the measures to uplift them.
• As the process of rural development accelerates, substantial
self employment can be expected to be generated in the field
of storage, transport, marketing, distribution of agro-
product, maintenance and repair of farm implements and
transportation equipments.
• A large portion of the people who migrate from rural to urban areas
in search of employment have to resort to odd jobs like newspaper
selling, shoe polishing, car washing etc.
• In the initial period of development, as migration of rural people to
urban areas increase, rapid expansion takes place in the traditional
and unorganized sectors.
• There is a shift in the employment composition from primary sector to
the services sector and manufacturing sector as modern services
expand.
• As modern economic development proceeds public administration,
commerce, finance, transportation and communications, teaching and
tourism etc may attract a large numbers of unemployed youth for the
new attractive jobs.
 3.Objectives of the study

• To assess various factors affecting employment.

• To forward policy tool to generate employment.
• To suggest measures to combat COVID-19 crisis.
 4.Methodology

• Secondary data on employment between the period 1971

A.D. to 2017 A.D.is taken as empirical evidence in case of
Nepal .
• The secondary data on the same headings belong to India is
taken as empirical inputs between the period 1973 A.D. to
2017A.D.
• The secondary data on the same headings from China is
taken between the period 2005 A.D. to 2015 A.D.
• Descriptive analysis has been made to come to the
conclusions.
• Employment Model (EP) has been originally introduced.
 5.Employment Challenges in Nepal

• The employment challenges in the developing countries

like Nepal may manifest itself in various forms.
• In Nepal ,poverty is widespread and unemployment
benefits are absent, very few can afford to remain
without employment.
• Low productivity and small earnings associated with a
sizeable segment of the employed population.
• In order to raise the productivity and earnings of the
workers, a change in the structure of employment
towards sectors with higher productivity is imperative .
• Pattern of structural change enables the labour
force to move from agriculture to other sectors
with higher productivity.
• The challenge before Nepal is to enhance
productivity in rural sector with assured gender
equality .
• In order to pursue a sectoral pattern of growth,
exercise on employment promotion through a
sectoral focus is being undertaken.
 6.Ways to Generate Employment in Nepal:
Employment Patriotism
• The famous Italian economist V. Pareto states in a case of social welfare
criterion ,"… any change that makes at least one individual better -off and
no one worse -off is an improvement in the social welfare.”
• Stated differently-a situation in which it is impossible to make any one
better off without making someone worse off is said to be Pareto optimal.
• In the same manner ,if a person by being employed or self
employed ,creates an additional employment should be termed as
employment patriotism (EP).
• Government, private sector and civil society are hoped to actualize this
approach to transform a nation as headway to socio-economic
transformation.
• The EP basically inspires all responsible agents of development to create
more jobs.
 7.Employment Model for the Developing Countries

• After considering the empirical data on Annexes, the following

EP model has been forwarded for general consideration where
employment growth rate (Ng ) , average employment rate
(Nt )and marginal propensity to consume(c) ;
Thus, Employment Patriotism (EP) =
where , 0<1-c<1,
If we assume , Ng =0.02 , Nt = 66 and c =.80 , the value of EP
= @6
• The result implies that if 100000 jobs are created in the
beginning of a year, nearly 6000 additional jobs will be created
at the end of the year.
 The necessary conditions for the operation of EP are:

• Perfect competition in the economy.

• Monetized economy.
•Inclusive growth through decent jobs.
• Promoting economic sector with high productivity.
• Addressing the voices of workers.
• Creating a conducive environment to invest.
• Expanding social security schemes.
• Strengthening accountability in the public governance.
• Developing domestic market for the domestic products.
•Favorable trade balance as well as balance of payment surplus.
 
 
 
 
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 8.Employment and COVID-19

• Due to COVID-19 pandemic, the world economy has plunged into

recession. Nepal cannot remain exception to it.
• Nearly 50 Millions of people lost their jobs in the world.
• Food intake, medical facilities, socio- cultural , socio-economic activities
etc. tends to hit the bottom .
• Government is found hard to manage crisis fund.
• A vital question comes up that how the economy would be revived from
global meltdown.
• Amidst the turmoil , what government needs to do is to provide jobs to
those who are idle due to this crisis.
• A crisis fund formed by the government to fight the present crisis need to
make larger by curtailing provisioned expenses in the budget 2020/21.
• Austerity provisions needs to be adopted to avail the required fund.
• Policy to create jobs to nearly 5 lakhs youth needs to be implemented at the
earliest to accommodate returned youth from foreign jobs and gradually 25 lakhs
people will be made employed in a positive spiral chain in 10 years to come.
• Creating jobs to the native people is like supplying blood through veins in the
patients.
• The ailing economy get revitalized through EP approach .
• Every sectors of the economy would be replenished with vital energy if job
opportunity is smooth. Good income, sound health, improved aggregate demand,
sufficient fund intake, etc. would be a pathfinder to boost up the economy.
• The EP, in coordination with the other sectoral, fiscal and monetary policies need
to be incorporated .
• According to EP, if 1 lakhs workers are employed this year, 15000 additional jobs
can be created at the end of the next year and 20 times employment is possible
to create in the following 10 years provided the conditions applicable.
 9.Conclusions and Recommendations

Conclusions : There are various factors determining employments-

• Income distribution, poverty, migration, education and
trainings, labour productivity, sectoral demand for labour.
• Socio-cultural and socio-political aspects to labour.
• Stage of development.
• Prevalence of manufacturing and service sector.
• Rate of shifts of labour force to the other sectors.
• Future prospects of workers.
• EP approach to employment stimulates domestic nations:
EP=
Recommendations : Government of Nepal and governments of concerned
nations are requested to initiate employment augmenting schemes.
Among them are :
• Introduction of Employment Patriotism (EP) approach which is
believed to boost up employment .
• Employment generating program may help fighting COVID-19 global
pandemic that proves as panacea if implemented jointly with other
fiscal as well as monetary tools.
• EP working under multiplier forces becomes instrumental to transform
each nation that makes possible for graduation of LDCs to developing
nation.
• Necessary conditions of EP need to be fulfilled. If not, its full-fledged
effect can not be materialized .
1991 39.7 4.8 Annex-1 21.41
Employment and GDP Growth in Nepal

2001 42.8 5.6 24.63

2011 37.5 3.7 27.47

2017 38.5 7.74 34.2

Source : NLFS,CBS
 Composition of Employment in Nepal

Census Employee Employer Own Account Unpaid family

year Worker Worker
1971 9.34 0.45 85.82 4.29
1981 9.07 0.69 85.54 2.52
1991 21.41 0.56 75.25 2.34

2001 24.63 3.80 56.69 5.73

2011 27.47 2.15 65.82 1.33

Source : CBS,2001 A.D. to 2011 A.D.

 Annex-3
Unemployed Labour by Source in Nepal

Census/survey Total Male Female

2001 census 8.1 7.0 9.2
NLFS 1996 4.9 5.6 4.1
NLFS1998 5.2 4.1 6.3
NLFS2008 2.1 2.2 2.0
NLFS2010 2.2 3.2 1.5
2011 census 1.48 2.0 0.85
NLFS 2017 11.4 10.3 13.1
 Annex-4
Percentage Distribution of Employment by Industrial Sector
Nep Yea Prima Rural Urba Rural Urba Rural Urba
al r ry n Secon n Tertia Urba n
secto dary ry n
r Secto Secto
r r
Bot 197 94.97 96.26 32.83 1.17 0.84 12.03 4.45 2.89 55.13
h 1
Sexe
s 198 91.15 92.74 63.96 0.53 0.33 3.81 6.47 5.14 29.09
1
199 81.23 85.54 24.07 2.56 1.90 11.40 14.87 11.4 60.86
1
200 65.70 72.25 42.18 11.86 10.17 17.95 22.21 17.37 39.60
1
201 64.27 71.80 22.20 9.27 7.83 17.28 24.02 18.25 56.30
1

Source : NLFS,CBS-2001 A.D. to 2017 A.D.

 Annex-5
GDP and GDP Growth in Different Years in Nepal

Year GDP in constant Price GDP growth %

(Rs. Billion )
2009/10 1192.8 4.26
2010/11 1367.0 3.85
2011/12 1527.3 4.61
2012/13 1695.0 3.76
2013/14 1964.5 5.72
2014/15 2130.1 2.97
2015/16 2674.5 .20
2016/17 3031.0 7.70
2017/18 3464.03 6.30

Source : CBS/ Nepal, 2017 A.D.

 Annex-6
Employment in Nepal by Industry
(Some Major Heads)
• Agriculture, forestry and Fisheries ( 1523000 jobs) 21.5%
• Manufacturing (1072000 jobs ) 15.1%
• Construction (978000 jobs ) 13.8%
• Wholesales /Retail Trade/ Repair(1240000jobs) 17.5%
• Education (588000 jobs) 7.9%
• Transportation and Storage (322000 jobs) 4.5%
• Accommodation of food/service activities(371000 jobs) 5.2%
• Human Health and Other Service Activities (171000 jobs) 2.4%
• Other Service Activities (156 000 jobs ) 2.2%
• Total Employed Labour Force : 7086000
 Annex-7
Some Employment Ratio in Nepal

• Total Employment :7086 Thousands

• Total Unemployed : 908 Thousands
• Total Labour Force :7994 Thousands
• Not in Labour Force :12750 Thousands
• Total Active Work force in Nepal :20744 Thousands
• Labour Force Participation Ratio :38.5
• Employment to population Ratio :34.2 ( Male : 48.3 ,Female:22.9 )
• Unemployment to population Ratio :11.4 (Male :10.3, Female:13.1)
• Formal Sector Employment :37.8 ( Agriculture :1.3, Non Agriculture:36.5)
• Informal Sector Employment: 62.2 (Agriculture:20.2,Non Agricullture:41)
• Formal Sector Employment out of Employed :15.4
• Informal Sector Employment out of Employed:84.6
 Annex-8
Growth Rate of Employment and GDP Growth in India

Primary Secondary Tertiary GDP Growth

Employmen
t Growth
1973-1978 1.78 4.78 4.86 2.61 4.60
1978-1983 1.56 3.95 3.46 2.19 3.92
1983-1988 0.28 6.44 2.11 1.53 3.99
1988-1994 2.16 0.19 5.03 2.39 5.85
1994-2000 0.56 2.44 2.85 1.04 6.51
2000-2005 0.05 5.30 4.08 2.81 5.98
2005-2010 1.40 3.46 2.41 0.22 9.08

India’s GDP increased from 186.3 billion US dollar to 26.52 Trillion US dollar between the
period from 1980 A.D. to 2017 A.D. Source : WB Report ,2017
 Annex-9
Distribution of Workforce in Different Industrial Sectors in China

Year Agriculture Industry Service

2005 44..80 23.80 31.30
2006 42.60 25.20 32.20
2007 40.80 26.80 32.40
2008 39.60 27.20 33.20
2009 38.10 27.80 34.00
2010 36.71 28.70 34.60
2015 28.30 29.30 42.41

Source : World Bank Report, 2017 A.D.

Thank You!