Beyond Remittances: Fueling Nepal's Future with Youth Skills and Entrepreneurship

Nepal's "Gen Z protests" in September 2025, while immediately triggered by a social media ban, were deeply rooted in a pervasive frustration among young people over systemic corruption and profound economic inequality. A critical component of this widespread discontent is the severe issue of youth unemployment and the significant mismatch between the skills imparted by the education system and the demands of the labor market. This deep-seated problem not only fuels social unrest but also drives a massive exodus of young Nepalis seeking work abroad, fundamentally challenging the nation's development model.

The Bleeding Edge: Youth Unemployment in Nepal

Youth unemployment in Nepal is a "significant and persistent challenge" that poses serious threats to the country's economic development and social stability. While the International Labour Organization (ILO) defines youth as individuals aged 15-24, the Nepal Labour Force Survey (2017/18) reported a youth unemployment rate of 21.4 percent for this age group. More recently, in 2023, the youth unemployment rate was estimated at 20.36%, significantly higher than the national average of 12.6%. This indicates deep-rooted structural challenges in the country's labor market. Such underutilization of its most energetic labor force inversely affects a country's development.

Why the Gap? Causes of Youth Unemployment

The causes of youth unemployment in Nepal are multifaceted, stemming from economic, educational, social, and policy factors:

• Educational Mismatch and Outdated Curricula: A critical issue is the disconnect between the skills provided by educational institutions and those demanded by the labor market. The current education system heavily emphasizes theoretical knowledge, often neglecting the practical skills required in growing industries like IT, engineering, and healthcare. Curricula are often outdated and fail to keep pace with rapid technological advancements, leaving graduates underprepared for the job market, even with advanced degrees. This directly increases the probability of youth unemployment.
• Limited Job Creation and Economic Slowdown: Key economic sectors such as manufacturing, agriculture, and services have not expanded sufficiently to absorb the increasing number of young job seekers. Economic slowdowns, influenced by political instability and unfavorable global conditions, reduce business investments, particularly impacting small and medium-sized enterprises (SMEs) which are significant employers of youth.
• Societal and Cultural Factors: There is a strong societal preference for white-collar jobs, leading to a stigma associated with blue-collar or vocational work. This discourages young people from pursuing opportunities in trades where demand exists, leaving vacancies unfilled. Gender disparities also limit career choices for young women, pushing them into saturated sectors.
• Weak Policies and Lack of Entrepreneurship Support: Existing labor market policies are often inadequately implemented or lack a specific focus on the youth demographic. Furthermore, young entrepreneurs face significant challenges in accessing finance, mentorship, and market opportunities due to a risk-averse financial system and bureaucratic obstacles. This insufficient institutional support discourages entrepreneurship as a viable career path.

The "Silent Plebiscite": Mass Migration Abroad

The most poignant consequence of this domestic opportunity deficit is the massive out-migration of young Nepalis. In FY 2024/25, a staggering 839,266 exit labor permits were issued, indicating that thousands leave the country every day. This is a "staggering out-migration for a country of ~30 million". These are not tourists, but rather the very cohort now on the streets.

Remittances from these workers abroad accounted for approximately 33% of Nepal's GDP in 2024, one of the highest ratios worldwide. While these remittances keep households afloat and pay import bills, they also mask a lack of structural transformation in the domestic economy. This reliance on "exporting its youth" rather than providing domestic opportunities highlights a "broken development model". The stark reality was captured in a protest placard: "The leaders' children return from abroad with Gucci bags, the people's children in coffins".

The Cost of Inaction: Broad Impacts of Youth Unemployment

The repercussions of youth unemployment extend far beyond individual financial hardship:

• Economic Costs: Lost productivity from underutilized youth leads to a substantial loss of potential economic output and directly reduces the country's GDP. Increased financial dependency on families and government support systems reduces household savings and disposable income.
• Social Costs: Prolonged unemployment can lead to frustration, disillusionment, and hopelessness, potentially pushing some youth towards criminal activities. It also contributes to rising mental health issues like stress, anxiety, and depression among young people.
• Long-Term Economic Implications: Extended periods of unemployment result in significant skills erosion, diminishing individual employability and the overall skill level of the workforce. This hampers Nepal's ability to attract investments and compete internationally. Delayed economic independence among youth also impacts major life decisions (marriage, homeownership) and slows down the broader economic cycle, undermining the potential "demographic dividend".

Bridging the Gap: Empowering Youth for Nepal's Future

Addressing youth unemployment requires a comprehensive, holistic approach that tackles the issue from multiple angles. Here are key areas for intervention:

1. Transformative Education Reform:
   • Curriculum Alignment: Urgent reform is needed to align educational curricula with the current and future demands of the industry. This involves integrating more practical, hands-on training alongside theoretical instruction, keeping pace with technological advancements.
   • Industry Involvement: Actively involving industry professionals in curriculum development can ensure that educational programs are tailored to meet real-world needs, enhancing graduate employability.
2. Expanded Vocational Education and Training (VET):
   • Address Lack of Opportunities: There is a severe lack of vocational training opportunities, with the current system heavily skewed towards academic education. Expanding VET is critical to bridge the skills gap and prepare youth for technical and trade jobs that are often in demand.
   • Dual Benefit: Vocational training not only prepares youth for employment but also fosters entrepreneurship by providing practical knowledge to start and manage their own businesses, contributing to job creation.
3. Fostering Entrepreneurship:
   • Access to Finance and Mentorship: Young entrepreneurs need improved access to finance, mentorship, and robust business incubation programs. Policies should incentivize startup creation and reduce bureaucratic hurdles to make entrepreneurship a more viable career path.
4. Strategic Skill Development:
   • Promote STEM Education: Underemphasized in Nepal's current framework, STEM (Science, Technology, Engineering, and Mathematics) education should be promoted from primary levels to equip youth with skills for globally and locally growing industries.
   • Cultivate Soft Skills: Employers highly value soft skills such as critical thinking, communication, teamwork, and leadership. Integrating these into curricula will enhance graduates' readiness for the modern workplace.
5. Addressing Regional Disparities: Investment in human capital should reduce regional disparities, as these contribute to youth unemployment.
6. Strengthened Policy Implementation: While Nepal has various policies (Labour Act 2074, National Employment Policy 2068, Foreign Employment Policy 2068), their implementation often falls short. A renewed government commitment is crucial to ensure these plans translate into concrete action and increased formal employment.

In conclusion, Nepal faces a defining moment. The "Gen Z protests" have laid bare a generation's profound frustration with a system that fails to provide dignified work and perpetuates inequality. Moving beyond reliance on remittances, investing in productive education, improving the agriculture sector, reducing regional disparities, and fostering entrepreneurship are vital steps suggested by research. By actively bridging the gap between education and market demands and empowering its youth with relevant skills, Nepal can transform its challenges into opportunities, building a more resilient, equitable, and prosperous future for all.

Keywords: Youth unemployment, Skill development, Vocational training, Entrepreneurship, Economic inequality, Labor market, Educational mismatch, Migration, Remittances, Government corruption, Gen Z protests, Policy reform, Job creation, Digital skills, Future economy, Nepal, Maitighar Mandala, Public funds, Accountability, Social stability, Human capital, Development model.