Welcome to my personal blog. I mostly write on entrepreneurship, economics, libertarianism, movies, and my travels.

Search This Blog

Aug 1, 2021

Reframing Our Youth Employment Problem

Photo by Phil DuFrene on Unsplash

As the nation grapples with the second wave of the COVID-19 pandemic, its ramifications go beyond its immediate public health impact. Health restrictions inevitable to mitigate the spread of COVID-19 have been detrimental to the economy, and are likely to have exacerbated Nepal’s seemingly perennial youth employment problem.

Youth account for about 40 percent of the 20.7 million working age population, and have an unemployment rate higher than the national average of 11.4 percent. Unpacking segments within youth  shows us that the 15-24 segment faces specific problems, with the highest rate of unemployment, and informal employment compared to other groups. Perhaps more worryingly, 35.3 percent of 15–24-year-olds were at the risk of social exclusion. The picture changes slightly as we move out from 15-24 to the 25-39 age bracket, which reports one of the highest underemployment rates across segments. This is not surprising given that majority of jobs created over the last decade (2008-2018) were casual or  short term work. The ongoing youth employment challenges have led to outcomes including, among others things, labour migration out of the country. According to the Department of Foreign Employment, labour approvals in FY 2019/19 stood at 236,208, with the volume to India conservatively expected a few times more than this number. 

The COVID-19 pandemic is expected to make things worse. Around 1.6 million jobs were disrupted in just the first phase of the pandemic, with the young casual and informal workers predominately bearing the brunt of the unemployment impact. The crux of the COVID-19 employment impact lies in underemployment, which globally has contributed more to estimated job losses (in work hours) than unemployment and whose impact is potentially longer term. Given our pre-existing problem of underemployment, especially among youth in the 25-39 age group, this represents an unprecedented employment challenge considering that we are right in the middle of our demographic dividend. The current challenge will unlikely be overcome by our economy in its current state, as we know businesses even in May 2021 were still not operating at pre-COVID-19 levels with important sectors like tourism and hospitality not expected to return to normalcy anytime soon.

Government response to the youth employment challenge has largely been programmatic in the years leading up to and during the COVID-19 pandemic. The Youth Self-Employment Fund, for instance, has been able to create around 78,000 self-employed youths in its total 12 years of existence (around 6,500 annually). While commendable, it barely makes a dent when an estimated 400,000 enter the labor force each year. In any case, programs like these, although beneficial, are not an adequate response to a youth employment challenge that has been exacerbated by COVID-19.

With this impending crisis in mind, it is imperative that we start to address structural barriers to improve the enabling environment for decent job creation. Systemic change is a difficult matter with various components that need to be  addressed in parallel, however in our view the following two areas might offer a good starting point.

First of all, there is no comparable alternative to entrepreneurship for job creation and economic growth. Encouraging entrepreneurship has been a government priority with commendable measures even in the recent budget, for example, to promote startups. The gap lies in the approach, which has largely been piecemeal, rather we need a coherent holistic approach for enterprise promotion if we are to achieve systems change for domestic youth employment that we desire.

A holistic approach entails allowing the conceptual space for innovative firms and business models to develop, and grow. A case in point are ride-sharing businesses whose development in Nepal was hampered by regulatory hurdles, and who remain in limbo even after years. However, policy incentives and entrepreneurship support must be delivered in a manner that employment created is ‘decent’. Without this, it seems likely that the predominance of casual employment, and its resultant decent work deficits, will continue onwards into the next decade as well.

Linked to the idea of holistic approach is the need for mindset change. The prevalent narrative seems to equate entrepreneurship largely with youth. However, in a job supply starved economy like ours, we should aim to promote entrepreneurship from every segment of the population. Globally, successful youth entrepreneurs seem to be an exception rather than the norm, with the average age of successful entrepreneurs being 45. That does not mean that we undermine the importance of youth entrepreneurship, especially given their accepted importance in building startups that fuel innovation. What it does entail is promoting entrepreneurship from all ages as an important source of wage employment creation, which can then chip away at our overall youth employment challenge.

Secondly, an issue that almost always comes up with any discussions of the private sector or the policymakers on employment is the mismatch between the available labor and the employment opportunities. Youth often complain about the lack of employment opportunities, while employers often complain that they are unable to find the right employees for vacant jobs. Large scale regularly updated labour market data is the key to better linking labour demand to supply.

Public agencies are an ideal mechanism to collect this data, which has actually been envisioned but not yet put into practice by the Prime Minister’s Employment Programme (PMEP). Once the data starts to flow in, big data analysis can allow for matching demand and supply at the granular level. What this means is that we can go deeper to say look at what specific competencies offered by job seekers are in higher demand among employers across Nepal.  This in turn can help better identify targeted measures for particular segments, for example women and youth from disadvantaged groups that suffer additional barriers to formal employment.

The following regular projections on new employment opportunities and  remuneration levels can then be used to help students and the academia better plan for entry into the labour market. It can be used to also make vocational training more demand oriented, which could in turn ease school to work transition and movement to formal employment  for the 15-24 age group.

These suggested ideas ultimately require a sustained national commitment to establishing a technically competent public employment system. This can further be supported by the coherent integrated policy measures we have talked about above, especially if we are to incentivize our youth to move from their existing concentration on low skilled segments to the demand of medium and higher skilled segments.

The COVID-19 pandemic has given us an opportunity to rethink our perennial problem and make significant strides towards solving it. It would be a precious opportunity wasted if we consider it business as usual.

-Surath Giri & Saurabh Shah

The authors are associated with Global Shapers Kathmandu Hub, a part of Global Shapers Community initiated by the World Economic Forum.

(Originally published on Republica daily on July 15, 2021)