Nepal’s economy added nearly four million jobs over the past decade, and average job quality increased significantly, according to the World Bank’s Nepal Jobs Diagnostic report released on Thursday. This is because Nepal’s economy has been gradually shifting from largely subsistence agriculture to more modern industry and services.

By 2018, there were 3.8 million wage jobs in Nepal, and another 2.8 million Nepalis were employed in wage jobs in other countries, the report said. Of the total jobs added to the economy since 2008, nearly half were wage jobs.

Most international migrants are male, two-thirds are under age 35, and 85 percent have less than a secondary education. International migrants earn much higher wages than their counterparts at home despite the mostly unskilled nature of the work.

External migration acts as a pressure valve by accommodating excess male labour supply but does not provide a viable option for most women, according to the report which has not factored in the economic disruption caused by the Covid-19 pandemic.

The report said that the Province 3 added 1 million new jobs in the last decade—over half of these were in Kathmandu valley and nearly 300,000 of which were wage jobs.

The report said that Nepal’s population shift to urban areas, particularly to Kathmandu valley, is partly driven by the high concentration of economic activity in the city of Kathmandu and its environs.

Kathmandu’s population has exploded, growing an average 5 percent annually, while many remote districts experienced negative population growth.

According to the report, more than half of the jobs added in the last decade were non-wage jobs, and the vast majority of the wage jobs added were temporary and informal.

A rising number of men have found wage work over the past decade, but women continue to face limited earning opportunities.

The construction boom—fuelled by post-earthquake reconstruction and remittance-financed housing upgrades—absorbed over 550,000 men into well-paid temporary wage jobs since 2008, jobs typically deemed unsuitable for women.

More men than women entered manufacturing work, but these jobs are also mostly informal and low-skilled, in addition to being poorly paid.

Despite great strides, not all job seekers have access to quality jobs, especially women. In the last decade, large numbers of men have entered jobs in construction, manufacturing, commerce and transportation, or have migrated abroad.

Even though many of these are informal jobs or temporary wage jobs, they are nevertheless more productive and provide improved livelihoods compared to traditional low-productivity farm work, according to the report.

Women, on the other hand, have not transitioned in significant numbers.

“The shift toward wage employment signals a fundamental change in Nepal’s economic development and is similar to patterns seen around the world. As economies diversify their production activities and increase scale economies, employment becomes more specialized and more productive, and jobs are increasingly based in firms rather than self-employment and pay more,” said Elizabeth Ruppert Bulmer, World Bank Lead Economist and main author of the report.

“Urbanization amplifies these effects by concentrating on economic activities while increasing the variety of products and services.”

Evidence from a combination of data sources – national labour force surveys from 1998, 2008 and 2018, the 2018 Economic Census, and a 2019 survey of 900 SMEs across 6 districts – points to several constraints to achieving better labour market outcomes in Nepal.

One key impediment is Nepal’s dramatic topography, which makes access to wage jobs and product markets costly.

Most jobs are informal and concentrate in relatively low productivity sectors, while most firms are micro-sized with one or two employees, and target small local markets rather than exporting or connecting to regional or global value chains, the report said.

In addition to credit constraints, many SMEs cite tax regulations, high taxes, scarce skills, and bureaucratic inefficiencies as obstacles to growth and therefore job creation.

Gendered social norms have limited female labour mobility and work opportunities, reflected by the fact that most women remain in unpaid work.

Three-quarters of new jobs taken up by women between 2008 and 2018 were in non-wage self-employment or unpaid family work, much of which was farm work. Occupational segregation and social norms contribute to the large earnings gap between men and women, as per the report.

In order to improve job outcomes in Nepal, the report recommends policies focusing on fostering SME productivity and growth; improving the business environment and labour market policies; increasing the individual, family, and economy-wide benefits of international migration; and preparing and connecting women and youth to better jobs, including entrepreneurship.

“While the report does not address the shocks from Covid-19 experienced by Nepal’s economy and its people, it underscores the imminent priority for Nepal to save livelihoods of the most vulnerable workers, including those in subsistence agriculture and urban and rural informal day labourers or self-employed workers who lost their income sources,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka.

Despite slower GDP growth than many neighbouring South Asian countries, Nepal had comparatively faster job growth averaging 2.9 percent per year. Employment growth largely kept pace with labour force growth, which averaged 3 percent per year during the same period, the report said.

Nepal grappled with the Maoist conflict from 1996 to 2006, a turbulent decade marked by political upheaval. The 7.8 magnitude earthquake in 2015 wrought havoc and mass destruction across the country, killing 9,000 and destroying assets, infrastructure, and livelihoods.

Parliament passed a new constitution in 2015, which was followed by a 6-month interruption of cross-border trade with India in protest over the new constitution. The cumulative result was economic stagnation in 2016. The economy rebounded thereafter, posting 8 percent growth in 2017, over 6 percent in 2018, and 7 percent in 2019, on the back of political stability, regular electricity supply, earthquake reconstruction stimulus, remittances and tourism growth.

Nepal’s private sector is creating some higher productivity jobs, but not enough to absorb the many workers who remain underutilized and in marginal employment, the report said.

“This is especially the case for women and rural populations, given the predominance of unpaid work and subsistence agriculture. A significant segment of Nepal’s human capital resources is underutilized.”

Traditional gender roles continue to marginalize women, and female human capital is underutilized and under-remunerated. Family-care responsibilities predominantly fall to Nepal’s women, limiting the time they have available to engage in full-time work or move for better work opportunities, the report said.

Due to a combination of mobility constraints associated with family care responsibilities, as well as security concerns and restrictive legislation, women are less likely to migrate internationally.

Occupational segregation and social norms—such as bias against female entrepreneurship, or construction work, or external migration—contribute to the large earnings gap between men and women, said the report.

Work preferences among younger and more educated women appear to be changing faster than private labour demand. Around 1 in 5 young females opts to remain outside the labour force, the report said.