Causes of Unemployment

In Nepal, about 67% of the total population is engaged in agriculture. Agriculture is their main source of income. The contribution of the agricultural sector to Nepal's total gross domestic product is about 31%. 

Since the pace of industrial development has been very slow, agriculture has become the source of employment for the majority of the population. 

In reality, the industrial sector has not been able to create employment opportunities within the country, forcing a large number of young Nepali men and women to seek foreign employment. This reflects the reality of unemployment in Nepal.

The causes of unemployment in less developed countries like Nepal can be explained as follows:

(a) High Population Growth Rate: Many underdeveloped countries like Nepal have a high population growth rate. According to the National Census 2058 BS (2001 AD), Nepal's population growth rate was 2.25%, whereas the population growth rate in the 2068 BS (2011 AD) census decreased to 1.35%. This shows that about four hundred thousand people are added to Nepal's labor market annually, but new employment is created for only one hundred thousand people annually. This forces a large portion of the population to remain unemployed.

(b) Subsistence Farming Practices: Nepal's agricultural practices are subsistence-oriented. Agriculture is considered more as a means of survival than a business. Therefore, Nepali farmers do not grow various crops, do not cultivate throughout the year, and do not use new technologies. This results in farmers being employed for only about six months a year and remaining unemployed for the rest of the time. Consequently, disguised unemployment and seasonal unemployment are prevalent in many agricultural-dominated countries like Nepal.

(c) Low Industrial Development: Although the history of industrial development in Nepal dates back to the Rana regime, its pace of development has been very slow. Many government-owned industries established in the past have closed down due to inefficiency. There is a lack of a favorable environment for opening new industries. This has prevented the creation of employment opportunities within the country. Therefore, a significant level of unemployment exists in Nepal.

(d) Low Rural Development: Nepal is a country filled with villages. More than 80% of the total population resides in rural areas. However, the areas where such a large population resides are very backward from a development perspective. The infrastructure for development, such as transportation, electricity, telephone, banks, schools, colleges, hospitals, etc., has not developed satisfactorily. Similarly, small, medium, and large-scale industries have not been established. Therefore, due to the lack of any kind of employment opportunities in rural areas, people residing in villages are forced to live in a state of full unemployment, underemployment, and disguised unemployment.

(e) Impractical and Defective Education System: Nepal's education system is impractical and defective. Instead of providing students with life-oriented, practical, and timely education, theoretical and traditional knowledge is imparted, which is not useful in real life. On the other hand, our education system has established the wrong notion that educated people should not do manual labor. This has led to an increase in educated unemployment in Nepal.

(f) Lack of Suitable Economic Policies: Suitable economic policies play a significant role in creating employment. In a context where suitable economic policies exist, investment increases, industrial development accelerates, development infrastructure is constructed, etc. This greatly helps in increasing employment in the country. However, Nepal lacks such economic policies.

(g) Conflict and Political Instability: The decade-long conflict in Nepal and the subsequent political instability have further complicated the problem of unemployment. During this period, the country's economic growth rate declined, and the industrial sector came to a standstill. The state's focus shifted to constitution-making rather than investment, capital formation, and production growth. Development expenditure was widely affected. All these factors prevented the growth of new employment opportunities, leading to an increase in unemployment.

Programs for Employment Promotion

The problem of unemployment can only be solved by providing new technology and market-oriented education, training, and skills to the available human resources in the country. The constitution of Nepal guarantees the right to employment for every citizen.

Unemployment remains a significant challenge in Nepal, particularly among youth and rural populations. According to the National Statistics Office, the overall unemployment rate increased from 11.4% in 2017-18 to 12.6% in 2022-23, with youth unemployment (ages 15-24) at 22.7% during the same period.

Due to the lack of sufficient employment opportunities in the country, a large number of youths are forced to migrate abroad for employment.

To address this issue, the Government of Nepal has implemented several programs aimed at enhancing employment opportunities and workforce skills:​

1. Prime Minister Employment Program (PMEP): Established under the Right to Employment Act (2018), PMEP aims to provide job matching, career counseling, and employment promotion services through Employment Service Centres (ESCs).

2. Youth Employment Transformation Initiative (YETI): Launched in collaboration with the World Bank, YETI strengthens the PMEP by improving employment services and labor market outcomes for youth, especially women from poor and marginalized communities.

3. Skills for Employment Programme: Supported by UKaid, this initiative focuses on equipping Nepali individuals, particularly women and disadvantaged groups, with skills to seize employment opportunities both domestically and internationally.

Additionally, the government organized a National Labor and Employment Conference in March 2025 to foster coordination and collaboration between different sectors and organizations, aiming to support strategic action plans for promoting internal employment over the next decade.

Despite these efforts, the unemployment rate remains high, indicating the need for continued and enhanced strategies to create sustainable employment opportunities within Nepal.