Enhance Nepal's Workforce Efficiency

The demographic dividend is a topic of much discussion in Nepal, highlighting its potential benefits. Nepal is actively promoting the concept in its plans and documents. A demographic dividend occurs when a country has a favourable population structure with a large working-age population compared to dependents. This favourable time can lead to economic growth thanks to more people being available in the workforce. Moreover, by managing the talent in the country, the demographic dividends can be transformed into talent dividends.
The most commonly accepted working-age group is 15 to 64 years old, which was defined in 1991. According to the 2021 census of Nepal, 65.24 per cent of the population is within this age range. People 65 years and older (referred to as the elderly or senior) are 6.93 per cent of the population. 

The population under 14 years old is 27.83 per cent. According to experts, the country is projected to become an "ageing society" by 2028, with 7 per cent of its population exceeding the age of 65. Which is expected to double by 2054, At this point, Nepal will uplift into an "aged society." The graph shows a large area in the working-age population, which indicates a very favourable glimpse of a demographic dividend. 

This demographic structure presents a favourable window of opportunity to leverage economic and social development. 
Analysing the 2021 census data, 9.98 per cent of the population falls between 10 and 14 years old. This age group is entering the labour force within the next five years. In comparison, only 3.28 per cent of the population will be entering the elderly age group during this same period. This is a big positive for the commencement of the expected population dividend.


Amid this, the expectation of the demographic dividend may be challenging. Nepal faces a high unemployment rate. 

A huge portion of the labour force is out of work, which means the gross saving of the country is very low for creating more jobs. Moreover, a significant number of young people are leaving the country for education or work opportunities. It's estimated that over 3,000 Nepalis leave the country every day. While remittances sent by them offer big financial support, their productivity isn't directly contributing to the domestic economy. 


Another critical challenge for Nepal's workforce is the skills gap. The education system is criticised for being impractical, and the lack of a strong entrepreneurial culture hinders growth. Over half of the unspecialized workforce is in the agricultural sector. Furthermore, the industrial sector's limited contribution to the economy indicates a low percentage of the labour force engaged in higher-skilled industries. Developed countries are enhancing their workforces by transposing them as a "talent dividend." China, for example, is transforming its demographic dividend into a "talent dividend" by investing in human capital management and talent development. This approach is emphasised through a strong STEM (science, technology, engineering, and mathematics) education system, which fosters a skilled workforce that fuels good economic growth. Additionally, an entrepreneurial ecosystem with innovative startups boosts its industrial endeavours. 

To address its workforce challenges, Nepal must adopt long-term strategies that harness both demographic and talent dividends. Focusing on human capital and talent management, Nepal should develop policies, plans, and strategies to achieve this transformation. 

The education system should prioritise equipping students with practical skills for their future careers. Education policies must ensure knowledge is applicable to real-world situations. A practical and innovative education system benefits both individuals and the nation. For example, STEM education can prepare students for practical applications and well-rounded careers. Additionally, incorporating ethical values into education is essential. With many students currently going abroad for higher education, new policies should strengthen domestic education, encouraging students to pursue their goals within the country. Universities should design research-based, relevant syllabi to meet these aims. 

Another crucial issue is addressing the push factors driving youth migration. The large number of young people seeking passports and crowding Tribhuvan International Airport daily is a serious concern. Comprehensive research is needed to understand these push factors and implement effective mitigation strategies. Creating employment opportunities, fostering a positive work culture, and providing robust social security programmes are vital.

Creating employment opportunities is a major challenge. Government data shows over half a million job seekers enter the labour market annually, yet the domestic market cannot absorb this influx. Addressing this requires concerted efforts from policymakers and stakeholders to create sustainable employment solutions. The agricultural sector in Nepal contributes 24.6 per cent to GDP (2023 data) and employs over half the population (50.2 per cent). 

However, the workforce in this sector lacks adequate skills, impacting their quality of life. The secondary sector, which contributes only 12.5 per cent to GDP, has a relatively small workforce. In contrast, the service sector is substantial, contributing 62.9 per cent to GDP, yet it lacks comprehensive database management and social security schemes. To enhance labour force management, Nepal must create connections among these key economic sectors. Establishing strong forward and backward linkages is essential for developing effective employment generation strategies. Emerging countries like China, India, and Bangladesh are leveraging such connections for demographic dividends. 

The industrial sector, especially manufacturing, seeks greater market efficiency and has the potential to employ a more technical workforce. Expanding into new international markets and negotiating trade agreements can enlarge the domestic labour market. Additionally, a flexible job market with hourly and part-time options can create more opportunities.

Implementing talent management across all economic sectors can significantly enhance demographic dividend strategies. Attracting and developing talent domestically and internationally, and strategically placing them with strong incentives can transform returns into a talent dividend. Promoting indigenous talent development can further boost the local economy. 

As Nepal approaches an ageing society, the government should harness retirees' knowledge and experience for younger generations through voluntary or paid programmes supported by robust social security schemes. 

Establishing clubs or programmes like "elder's clubs" or "skill-sharing circles" can facilitate intergenerational knowledge transfer. Recognising the value of practical skills is also crucial. For instance, an experienced but illiterate tea farmer in Ilam may offer more practical expertise than an academically qualified graduate. Human capital is the cornerstone of economic production. 

Given Nepal's current workforce scenario, it is an opportune time to leverage its economy. Evidence-based policies and long-term plans are essential. Comprehensive policies for at least fifty years, focusing on retaining youth, enhancing industrial infrastructure, and creating a conducive living environment, are vital to realising demographic and talent dividends.

(An MBA from the International University of Japan, Bhattarai now works at the Ministry of Defence.)