Unemployment is a problem generally in Nepal, but underemployment may be an even bigger issue, especially in the informal sector. Throughout the world, youth are often forced to take on temporary, part-time, casual and insecure jobs with poor and hazardous working conditions and few legal provisions for their protection. Young women frequently experience gender discrimination in the workplace, are often not allowed to work, or are forced into subsistence activities. Young people who enter the labour market with underdeveloped skills, limited or no education, and limited job prospects are most at risk of underemployment throughout their working lives.

The definition of ‘youth’ varies across the globe; in Nepal, the population in the age group 15–29 years is considered youth. Following this definition, 26% of all people were youth in 2008, making up nearly half of the economically active population. In 2011, 28 percent of the total population of Nepal are in the age group defined as youth, 54% of whom are girls and women.

Coverage Type of Underutilization


Time Related







under utilized

Nepal 3.6 7.2 8.8 20.4 40
Male 4.2 8.3 12.8 24.1 49.4
Female 3.1 6.4 5.8 17.6 33
Urban 12.6 6.8 13.6 30.2 63.3
Rural 2.1 7.3 8 18.8 36.3
Source:CBS Nepal Labor Force Survey 2008

The immediate problems driving youth underemployment in Nepal are families’ poverty, hunger and deprivation. As a result, people have to start working at an early age rather than using their time to develop human capital. This problem is more prevalent among disadvantaged and discriminated communities.

The economy is not capable of creating productive employment for all those entering the labour market. The education system remains static with a huge discrepancy between market trends and prospects and actual supply. Nepali youth face two interrelated problems: lack of access to relevant education and training, and lack of information. Educational and training institutions lack a career guidance and counselling system that could help youth to select prospective careers. The private sector remains the single largest employer. However, it has not exhibited the capacity, dynamism and skills needed to accelerate growth. It also faces a large number of problems including an unfavourable investment climate, poor regulation, lack of incentives, growing labour militancy, weak rule of law and, most prominently, a poor political environment and a long transition period to peace leading to uncertainty.

Structural transition away from agriculture towards the industrial sector has been slow; the contribution of manufacturing to GDP has declined continuously for more than a decade, reflecting limited employment opportunities. Inflation, the balance of payments, and energy and fuel crises show problematic trends. Enormous inequalities exist among workers across sectors, geographic locations and gender. Employment opportunities are mainly centred in urban areas, where only a fifth of Nepal’s youth live. The conflict devastated traditional systems that ensured young people had livelihoods options and employment. Youth from conflict areas were largely excluded from seeking relevant education and training, and their mobility to obtain employment was limited.

The 2007 policy on technical education and vocational training focuses on expansion, inclusion, integration, relevance and sustained funding to respond to market demand. No concrete follow-up action seems to be in the offing, except for project-level efforts. The Three-Year Interim Plan articulated objectives to encourage employment promotion and outlined a strategy for training programmes on vocational skills development. A National Plan of Action for Youth Employment 2010–18 has been prepared with support from ILO to address various youth issues and identify activities and possible outputs. A Labour Market Information and Analysis System will be supported by ILO to allow better linkages between market developments and training institutions that will facilitate young people’s choices to invest in a particular career path.