Nepal’s economy looks good on paper at first glance, with a large number of young, working-age people. In reality, however, the situation is quite different. Government figures show youth unemployment at 12.7 percent. Even more disconcerting is that less than 40 percent of the labour force is actually employed. Too many people earn little or nothing while the country struggles to move forward. Fresh data from the National Statistics Office makes this imbalance hard to ignore. The National Transfer Accounts report shows that people in Nepal spend far more than they earn through work. The shortfall, known as the life-cycle deficit, has reached around Rs 1,500 billion. Most people depend on someone else’s income for much of their lives. Children and young adults rely on families, while older citizens slip back into dependence as costs rise and earnings fall. Only those roughly between the ages of 27 and 46 earn more than they spend, and even that phase does not last long.
Nepal's unnatural demographic trends
This is troubling because Nepal still enjoys a demographic advantage. About 65 percent of the population falls within the working-age group, which could drive higher production, stronger savings, and steady growth. Instead, low participation and joblessness among young people have rendered this advantage meaningless. Groups that could have supported the economy have become a burden. As more people depend on fewer earners, families and the state are placed under increasing strain. The roots of the problem run deep. Education and skills training remain uneven. Families bear high out-of-pocket costs while public investment remains limited. Many young people complete their education without skills that match available jobs. Others see no prospects at home and leave for foreign employment. Remittances help households survive, but local factories, farms, and businesses lose workers. Combined with weak industrial growth and a narrow formal job market, employment options shrink rapidly. Although employment policies exist, they are implemented in fragments, often without clear direction. Another concern is that the years of high earning are short. When income peaks only briefly, saving becomes difficult. Limited savings restrict investment, leaving households vulnerable to shocks and the economy fragile.
The effects are already visible. As dependence remains high, spending on social support continues to rise. The potential output of a young workforce goes unused. If this trend persists, economic growth will slow further. Income inequality will widen, and public finances will face increasing pressure as the state supports both the young and the elderly simultaneously. Addressing these challenges will require more than slogans. Young people need education and training that lead to real jobs. Women and youth must find it easier to enter and remain in the labour force. Public spending on human capital should give education the same priority as health. Social support programmes must be recalibrated to protect the vulnerable without draining resources. Domestic jobs and small businesses need space to grow. If authorities act on these measures, Nepal still has a chance to turn its demographic numbers into an advantage. However, that window will not remain open indefinitely. If jobs continue to be scarce and youth participation in the labour force remains low, the demographic dividend will fade into yet another missed opportunity.
