185,694 potential workers remained out of the labour force of which maximum were students with 43 percent followed by those attending family duties with 28 percent and old age with 15 percent, in 2018.
The Annual Report 2019 by Royal Monetary Authority states that compared to female Labour Force Participation Rate (LFPR), male LFPR is higher with 70.1 percent, whereby 18 percent of potential female workers are engaged in household works compared to 2 percent of male.
Although LFPR in urban area is higher than rural areas, there is higher gender disparity; only 45.1 percent of potential female workers are in labour force compared to 60.1 percent in rural areas. Unlike in urban areas, rural female labour force is easily absorbed in the agriculture sector, report adds.
Agriculture is still a principal economic activity in rural areas, generating more than half the total workforce. However, employment in agriculture has been steadily declining from 59.6 percent in 2010 to 54 percent in 2018 due to gradual economic transformation from agriculture to industry and service sectors.
About 75 percent of rural employment is in agriculture sector. The labour productivity sector in agriculture sector is also comparatively lower than industry and service sector.
In addition, reports states that average income earned by a worker in agriculture sector amounts to Nu 64 per hour as compared to Nu 1,060 per hour in industry sector and Nu 560 per hour in service sector.
“This shows high income disparity amongst the workers across sectors. In fact, majority of poverty-stricken population are also found in the rural areas that are largely dependent on agriculture. The agriculture productivity gap indicates misallocation of labour in the economy,” report says.
Meanwhile, the report shows that underemployment rate has increased from 2.8 percent in 2010 to 6.1 percent in 2018, and it is highly prevalent in rural sector. “The main reason for increase in underemployment over the years is financial needs, as earning from the given employment is inadequate to meet economic needs,” the report states.
Report also points to the persistent slowdown in economic growth for the past two years leading to limited job creation, and resulting in overall unemployment rate of 3.4 percent, is the highest since 2010. The key factor for growing unemployment in the market is mainly due to demand side constraints and skill mismatches, as indicated by sharp decline in output, and explained by fall in investment and employment level.
One third of the unemployment population expressed that there are limited job offers despite the growing labour supply. At the same time, there is a supply side constraint with more than half of the unemployed labour force either lacking appropriate experience or required qualification and skill for available jobs.
“Therefore, the combined effect of labour market mismatches and lackluster economic growth caused higher unemployment level in 2018,” the report explains.
Report also states that the private sector employment still remains less attractive for job seekers. In 2018, more than a third of the unemployed labour force preferred jobs either in civil service or public corporations compared to total labour demand.
Labour market in the private sector still remains less attractive due to job security and non-competitive employment benefits compared to the civil and corporate job market.
In addition, due to slower and lack of broad-based economic growth and skill mismatch in the labour market, more than half of the unemployment remained without job for more than 12 months and long-term unemployment rate has been rising from 1.4 percent in 2017 to 1.8 percent in 2018.
Youth are more exposed to long-term unemployment with high mismatch of skills and lack of experiences despite meeting required level of qualification. In 2018, 47 percent of youth were in chronic unemployment group, which further contributed to structural unemployment as they are more likely to remain out of work even at adult working age cohort.