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The Effect of Parents Education in Labor Participation Behavior of

Children: The Context of Nepal

BY

Samir Sharma

A masters thesis submitted in partial fulfillment

of the requirements for the degree of

MASTER OF ARTS IN

INTERNATIONAL DEVELOPMENT

at the

INTERNATIONAL UNIVERSITY OF JAPAN

2012

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The thesis of Samir Sharma is approved by the Thesis Examining Committee:

_______________________________

Professor Makota Kakinaka (Examiner)

_______________________________

Associate Professor Shingo Takahashi (Supervisor)

INTERNATIONAL UNIVERSITY OF JAPAN

2012

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iii

ACKNOWLEDGEMENTS

As Albert Einstein said, A perfection of means, and confusion of aims, seems to be

our main problem.- This was very true when I first started my paper after getting my data

last summer from Central Bureau of Statistics, Nepal. It almost took me four months just to

know what to do; with constant discussion with my supervisor and his valued suggestion,

today this paper is finally done.

My deepest appreciation to all the time that Professor Shingo Takahashi has devoted,

all the valued suggestion given, consistent guidance, encouragement, and his sincerity to

shape this thesis. I am privileged to be supervised under him, without whom this paper would

have not been possible. In addition, without any ruling out the contribution of Prof. Koji

Kotani, Makoto Kakinaka, Eiji Mangyo, Osamu Nakamura, and Oh Jinhwan; for continued

encouragement and guidance when I was lost in unrestrained economic concepts.

I owe my sincere thanks to all the IUJ family, MLIC members, IDP faculty,

administration and many more to have helped my through this two year at IUJ and making

me feel at home. My special gratitude goes to my scholarship provider, Asian Development

Bank-Japan Scholarship program for providing me the support throughout this masters

program, without which this endeavor would not have been accomplished.

There are many other individuals who in one way or another have contributed to this

thesis. My deepest appreciation to all my friends and colleagues Sujan, Shaleen Raja,

Priyanshu, and Baburam for the love and support they have provided me in these two years.

Finally, I would like express my deepest appreciation to my parents and all my family

members, my wife Anjali, and my little angel who have always been there for me and

showered with their endless love and support.

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ABSTRACT OF THE THESIS

The Effect of Parents Education in Labor Participation Behavior of Children: The

Context of Nepal

By

Samir SharmaMaster of Arts in International Development

International University of Japan, 2012Associate Professor Shingo Takahashi, Supervisor

This study examines the behavior of labor participation in Nepal. The data used for

this study are national level survey conducted by Central Bureau of Statistics, Nepal in the

year 1995/96 and 2003/04 i.e. Nepal Living Standard Survey 1995/96 and 2003/04. In an

attempt to analyze the labor behavior, the factors like parents educational level, living

together at home, ethnicity, and gender have been considered. Two models have been used to

conduct the study: Linear probability and Pooled Cross Sectional Data Analysis method and

the study is able to show that fathers education level and living at home have significant

impact in the labor participation behavior where as Nepal being patriarch society mothers

education does not have much significance.

Key Words: Labor Participation; Gender Disparity; Education; Nepal

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TABLE OF CONTENTS

ACKNOWLEDGEMENTS ......................................................................................... iiiABSTRACT OF THE THESIS .................................................................................... ivTABLE OF CONTENTS ............................................................................................... vLIST OF TABLES AND FIGURES ........................................................................... viiLIST OF TABLES ....................................................................................................... viiCHAPTER 1 .................................................................................................................. 8INTRODUCTION ......................................................................................................... 8

1.1 Background of the Study ..................................................................................... 81.2 Objective of the Study ......................................................................................... 31.3 Methodology of the Study ................................................................................... 41.4 Organization of the Study .................................................................................... 4

CHAPTER 2 .................................................................................................................. 6REVIEW OF LITERATURE ........................................................................................ 6CHAPTER 3 ................................................................................................................ 10OVERVIEW OF NEPALESE SOCIO-ECONOMIC CONTEXT .............................. 10

3.1 Demographic Background of Nepal .................................................................. 103.2 Political and Socio-economic Scenario ............................................................. 11

3.3 Employment and Poverty Alleviation ................................................................ 13

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3.4 Education and Gender Issues ............................................................................. 18CHAPTER 4 ................................................................................................................ 23

FRAMEWORK OF ANALYSIS ................................................................................. 23

4.1. Model Specification .......................................................................................... 244.2 Data Analysis ..................................................................................................... 254.3 Expected Signs of Coefficient ........................................................................... 264.4 Empirical Results ............................................................................................... 26

CHAPTER 5 ................................................................................................................ 29CONCLUSION AND POLICY IMPLEMENTATION .............................................. 29BIBLIOGRAPHY ........................................................................................................ 31APPENDIX .................................................................................................................. 33

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LIST OF TABLES AND FIGURES

LIST OF FIGURES

Figure 3-0-1 Sectoral Contribution to GDP ............................................................................. 13Figure 3-0-2 Economically Active Population and Underutilization by Region and Sex ....... 15Figure 3-0-3: Percentage of underutilized population ............................................................. 16Figure 5-0-1: Map of Nepal with Sample points ..................................................................... 33

LIST OF TABLESTable 3-0-1 Major Indicators ................................................................................................... 14Table 3-0-2: Reason for leaving school/college for the population aged 6-24 years. ............. 19Table 3-0-3: Short Term Vocational Training Providers in Nepal and Yearly Output ........... 21Table 4-0-1: Descriptive Statistics ........................................................................................... 25Table 4-0-2: Result from Regression ....................................................................................... 26Table 4-0-3 Pooled Cross Sectional ......................................................................................... 27

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CHAPTER 1

INTRODUCTION

1.1 Background of the Study

The historic movement of 1990, which established the democratically elected

government in Nepal, had given much priority to education reform in the country. The

elected government was convinced that the education reform could bring sustainability in the

socio-economic scenario and newly established democratic polity in then Nepal. The

government was committed and adopted the Jomtien Declaration (1990) on Education for

All. To implement the reform, the government developed the Basic and Primary Education

Master Plan (BPEP) 1991-2001, with technical assistance of UNDP. Furthermore, the

government formed a high-level education commission to provide information regarding the

policy reform. BPEP was implemented by the Ministry of Education and Sports (MOES)

using its own resources and financial assistance of donor agencies like the World Bank,

DANIDA, UNICEF, and JICA. Total of US$216.84 million was injected for the first phase of

BPEP (1992-1999). In addition to BPEP another project Primary Education Development

Project (PEDP) was initiated in 1992 with financial assistance of US$ 20 million from the

Asian Development Bank (Khaniya and Williams (2004))1. Both the projects were very

ambitious, and the amount invested was too colossal for a poor country like Nepal which had

just got democracy.

According to Khaniya and Williams (2004), the primary objectives of BPEP were

curriculum reform, provision of text books and instructional materials, institutionalization of

teacher support, improvements in access to and management of education, and improve

1 Khaniya, T. & Williams, J.H. (2004). Necessary but not sufficient: challenges to(implicit) theories of education change: reform in Nepals primary education system.

International Journal of Educational Development, vol. 24, pp 315328.

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facilities of the Ministry of Education. Mean while PEDP focused on the development of the

training programs for teacher and managers, establishment of teacher training centers and

improvement of school facilities. Although both the projects were initiated to complement

each others objectives but it turned out that there was lack of coordination among these

projects, for example the curriculum reform of BPEP had to be linked with PEDPs teacher

training but it was not.

During 1990, Nepal was in dire need of primary education with enrollment rate par

below universal target of 80%; especially for girls at 37%. Majority of children enrolled at

primary level hardly made it to fifth grade and among those who reached fifth grade only

one-third were promoted. Though 10 percent of the national budget was devoted to education

but resource distribution was uneven. There were large discrepancies in the rate of enrollment

in terms of region, geography, ethnicity, and gender.

Though the newly elected government was investing heavily in the education reform,

but it is known that sustained socio-economic development is not only possible by mere

capital investment. It had to be reinforced with the supply of appropriately trained and

adequate human resource. Moreover, the Nepalese education system has been always

criticized for being skewed in producing individuals with clerical and managerial skills.

According to Poudyal (2002)2, the domestic job market accompanied by the slow economic

growth has always been saturated and, therefore, it cannot absorb the work force educated

and trained in humanities, arts, social sciences and management. With focus to develop

qualified, skillful and competitive human resource which would be aligned with the demand

of the domestic job market, the Council for Technical Education and Vocational Training

(CTEVT) was formed as an autonomous apex body for Technical Education and Vocational

2 Poudyal, L. P. (2002). Changing labor market environment, technical training

programs and opportunities for employment. Technical Education and VocationalDevelopment Journal, Vol. 7 (no.1), July 2002.

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Training (TEVT) in 1989.

According to National Labor Force Survey (2008), out of the total 14.4 million

population aged 15 years and above, only 6.7 million (46.7 percent) have never attended

school, 1.5 million (10.7 percent) have not completed primary school, 1.9 million (13.5

percent) have completed primary level, 4.2 million (29 percent) have completed secondary

school or higher level3. The situation of education has improved and Nepal has come a long

way since 1990 but even though peoples awareness regarding education has increased, not

only for conventional schooling but also for TEVT, the employment to population has shown

decline of 3 percent while compared with NLFS 1998/99.

1.2 Objective of the Study

Most of the prior studies and empirical analysis conducted in the field of education

and labor participation have been more concentrated on the female participation in the labor

market and its impact on the productivity and fertility; whereas in case of education, how

parents education can effect childs health and cognitive development have been studied.

This paper tries to analyze the effect of parents education level on childrens labor

participation behavior. In the present context of Nepal, where poverty is the major cause of

conflicts and political turmoil, ever widening gap of employment, underutilization of

productive age group belonging to 20-29 years population category, increasing time related

unemployment, high school/college dropout rate, state of lawlessness, increasing pressure

from political party affiliated labor unions, issues of business related securities, and other

social problems prevails. Other issues of internally displaced during the decade long conflict,

presently challenges to rehabilitation of disqualifies and under age Maoist combatants,

increasing trend in foreign employment in Middle East and some Asian countries like

3 Central Bureau of Statistics, National Planning Commission Secretariat

(2008).Nepal Labor Force Survey 2008 Statistical Report, Government of Nepal.

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Malaysia, neighboring India and other countries; all these factors have motivated to conduct

this paper to analyze the labor participation behavior of childrens which also will be affected

by the familys socio-economic condition, parents education level and their education level.

This paper attempts to find underlying reasons behind the labor participation in the

context of Nepal. The study is focused on finding why improvement of conventional

education system and introduction of TEVT still have not been able to promote labor

participation as pointed out by the NLFS 2008.

The objectives of this paper are: (a) to examine the effect of parents education in the

labor participation of the children; (b) to examine the difference between gender,

developmental region, and skilled and unskilled human resource in the labor market; (c) to

delineate some lessons learnt from the findings in terms of the existing education system of

the country.

1.3 Methodology of the Study

For the empirical analysis, the study uses data from National Labor Force Survey

2008, Nepal Living Standard Survey Report (NLSS) 1996 and 2003/04 conducted by the

Central Bureau of Statistics National Planning Commission Secretariat, the Government of

Nepal. In empirical analysis two different models i.e. Linear Probability Model and pooled

Cross Sectional Data Analysis Method will be used. The theoretical framework for the paper

will be supported by the literature review of labor participation, role of gender in labor

participation, Impact of Educational Attainment and Labor Force Participation on Family

Formation, and other related articles and research studies.

1.4 Organization of the Study

This paper is an attempt to analyze the effect of the parents education on the labor

participation of the children. It also investigates the disparity existing among the ethnic

group, gender, geographic regions, and the pattern of migration the labor participation.

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Chapter 2 tries to find the relevant theories and review of the previous studies. Chapter 3

presents the overview of the scenario of education, labor and recent political development in

the country. It also attempts to present the current socio-economic situation of the country

after end of a decade long insurgency that caused many people to migrate from their homes.

Empirical analysis using the two models mentioned in the methodology of the study will be

presented in the Chapter4. And, lastly Chapter 5 will present the conclusion and policy

recommendation to mitigate the existing labor and education problem.

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CHAPTER 2

REVIEW OF LITERATURE

During the period of 1980s most of the studies carried on the family structure or the

labor force participation has been concentrated on the role of women participation in the

labor market, their educational level attainment, and effect of these two in the family

structure. One of the most pre dominant studies into the impact of socio-economic

characteristics on family formation has been by Beckers (1981) thesis, which states that as

womens educational level and participation in labor market is increased the popularity of

marriage and parenthood will decline.

Other scholars, who tried to study the impact of parents education on the childrens

aspiration or educational attainment, have been more concentrated on the relationship of

parents education and their living standards on the health, education and physiological

improvement of children. According to J.S. Eccles (2005), what parents learn during their

schooling have direct influences on the way they interact with their childrens learning

activities at home4. The article further advocates that a person with a higher level of

education will choose person with similar educational qualifications to marry, which will

result in higher income of both the parents. These demographic characteristics will have

effect on their dwelling and the surrounding they choose to live. Together with the higher

family income and family residence will persuade the type of schools, neighborhood and the

risk that child will be exposed to (Coleman, 1987 and Furstenberg et al., 1999)5. The factors

4Eccles, J.S. (2005). Influences of parents education on their childrens educational

attainment: the role of parents and child perspective. London Review of Education, Vol.3,No.3, November 2005, pp.191204.

5 Coleman, J. S. (1987) Families and schools,Educational Researcher, 16, pp3238Furstenberg, F. F., Cook, T. D., Eccles, J., Elder, G. H. & Sameroff, A. (1999).

Managing To make it: urban families and adolescent success (Chicago, University ofChicago Press).

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like schooling and the secure neighboring that parents can afford will eventually have less

stressful childhood leading into their cognitive development. Another scholar, Kohn (1969),

argued that, the type of job that parents have also influences values and behavior that they

have for their children. He said that a working class family would more likely value

obedience, in contrast to the parents in professional job would value intellectual curiosity6.

Yet some study also support that though social class has underlying importance in childs

cognitive development but there are cases where children from lower-social class have

higher aspire to attain higher education and occupational goals in spite of the social class

exclusion.

L.A.Cameron et al. (2001), stress on the economic development through investing in

the womens education. The changes in womens status in the society and within the family

through attainment of education have numerous positive externalities like reduction in

fertility and population growth, improved health and life expectancy of children, reduced

infant mortality rate, and reduction in environmental degradation7. While the paper of L.A.

Cameron et al. advocated on improvement of womens participation in labor market and

uplifting their socio status; the paper by V.V. Eberharter on Gender roles, labor market

participation and household income position (2001) using the data from the German Socio-

Economic Panel showed that, people working pattern differs according to the poverty level

of the household. The sample belonging to the household with sound financial background

followed the traditional gender role pattern for employment was the empirical analysis of the

study; while though there was not enough empirical evidence to prove that sample from

poorer households didnt follow the traditional pattern over the observation period but

6 Kohn, M. L. (1969) Class and conformity: a study in values(Oxford, Dorsey).7 Asian Development Bank,Asian Development Outlook(Manila: Asian Development

Bank, 1989), pp. 17071.Michael P. Todaro, Economic Development, 5th ed. (New York: Longman, 1995),

chap. 11.

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women belonging to poorer households are always in pressure to add in the existing

household income.

The empirical study conducted by Jamison and Lockheed (1987) using data obtained

from survey of 795 household of rural Terai of Nepal argued that the level of education

attained by adults will have effect on the cognitive competencies and attitudes, which further

more will result in an increased desire for schooling of their children. The analysis was done

on three generations, and the results were consistent of which few results are presented as

follows: first generations determinants like socio-economic status, literacy, and landholding

were significant determinants of second generation innate ability as measured by using the

Ravens Progressive Matrices (RPM) test; RPM was a significant determinant of second-

generation schooling; attitudinal modernity regarding schooling was a significant

determinant of attitude toward school for all households; and third-generation child

schooling was resolute base on the second-generations landholdings, socio status, schooling

and numeracy, attitudinal modernity, and the child's sex8.

All the prior literature reviews and paper highlighted that how parents education,

socio-economic status, parents perception about their childrens education, types of the job

that parents have, which working class do parents belong too, etc have effect on the

education attainment of the children. Some of the scholars also strongly advocated that

mothers education or womens education level has even more role in shaping the childs

cognitive development, but in the case of Nepal were gender and social disparity highly

exist, would these factors still affect in the education attainment of the children is still

arguable. Another issue to be addressed is that 80 percent of population is dependent on

subsistence farming where children are prevented from going to school as they are needed to

8 Jamison, T. & Lockheed, M., E. (1987) Participation in schooling: Determinants andLearning Outcomes in Nepal,Economic Development and Cultural Change, Vol. 35, No. 2,(Jan, 1987), pp. 279306

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help in household chores. The socio-economic growth of Nepal has been stagnant for a long

time and a decade long Peoples Movement launched in 1996 by the Maoist had put a

deadlock to the development of the country.

The study by Sharon and Emily (2001) showed that the gender gap in education had

seen slight change. It also pointed out that more highly educated heads and higher position

in the caste hierarchy; these characteristics which are related with increment in the

educational participation but in contrary sample in this group were more associated with

gender discrimination. Similar was the case of urban residence, where access to schooling

facilities, higher quality of teachers and interaction with modern economic sector are

prevalent, still the opportunities for girls showed no improvement. In contrast to anticipation

of the gender and development literature, the study pointed out that the girls in socially

dominant and economically advantaged high-caste household were further disadvantaged9.

This study signifies that the case of Nepal cannot be generalized with the developed world

9 Stash, S. & Hannum, E. (2001). Who goes to school? Education stratification bygender, caste and ethnicity in Nepal. Comparative Education Review. Vol. 45, No.3, pp. 354378

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CHAPTER 3

OVERVIEW OF NEPALESE SOCIO-ECONOMIC CONTEXT

3.1 Demographic Background of Nepal

The Federal Democratic Republic of Nepal is situated in South Asia, bordered on

north by Peoples Republic of China, and on south, east and west by Republic of India.

Nepal, a landlocked country with total area of 141,181 square kilometer out of which 80

percent is covered by rough hill and mountainous terrain. According to the population

census of 2001, the total population of the country is approximately 23 million with

population growth rate of 2.25 per annum10. The latest preliminary report of Population

Census 2011 has predicted the total population to be approximately 26.6 million with growth

rate of 1.4 per annum. The absent population has doubled from last census to nearly 2

million which is dominated by males11.

As per 2001 census data, 9 million Nepalese (40 percent of the total population) live

below poverty line, which is set at about 77USD per capita per annum. The poorest 20

percent get 12 percent of the national income; the gender development index ranks 121st out

of 143 and adult literacy is about 41.8 percent of the population above 15 years of age.

Based on the estimate of NLSS 2003/04 the population living poverty line will come down

to 25.4 percent in 2008/09 with 5.5 percentage point drop over a period of five years. The

ongoing Three Year Interim Plan attempts to eliminate social discrimination and bring the

poverty line below 21 percent in order to achieve Millennium Development Goal (MDG).

The labor force of 11.2 million is increasing at a rate of 2.4 percent of which approximately

80 percent is engaged in subsistence agriculture, 3 percent in manufacturing industries and

10Central Bureau of Statistics (2001),Population Census,Nepal

11 Central Bureau of Statistics, National Planning Commission Secretariat (2011),

Preliminary Result of National Population Census,Nepal

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17 percent in service industries (MOF, 2005)12.

The numbers of households have increased from 3.7 million recorded in 1998/99 to

4.8 million in 2008. Over the period of a decade the number has grown by 29 percent.

Though the numbers of households have increased, the average sizes of household have

declined to 4.9 persons from 5.1 persons. Another important finding of NLFS 2008 is that

the percent of population in 0-14 years age group has shown light decline of 38.7 from 41.3

percent, whereas the population belonging to the age group of 15-64 years has increased by

1.9 percent from 54.5 percent in 1998/99. The elderly population of age group 64 and above

remained more or less same as the previous survey. The number of household with female as

household heads has show increment of 8 percent, and age dependency and sex ratio have

declined over the period.

3.2 Political and Socio-economic Scenario

Nepal was earlier a constitutional monarchy country which in May 28, 2008 was

declared a republic country by the first meeting of Constituent Assembly. The Constituent

Assembly election which was held on April 10, 2008 was the outcome of a decade long

conflict within the country. Now, one of the major political parties, the Communist Party of

Nepal (Maoist) (CPN (M)), had launched its Peoples War in February 12, 1996, in the

Mid Western hills to eliminate feudalism and bureaucratic capitalist from Nepal. The

location from where the movement started was remote and far from the capital and an

oppressed ethnic population were targeted as an easy recruitment for the Peoples Army13.

The insurgency started with a 40 point demands presented to the government as a perquisites

for negotiation. According to Karcher, US military advisor, the Maoist insurgency was result

of political and socio-economic problems of the country.

12 Ministry of Finance (2005),Economic Survey, Nepal13 Bhurtel, J. & Ali, S., H. The Green Roots of Red Rebellion: Environmental

degradation and the rise of the Maoist movement in Nepal.

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As onset of rising Maoist insurgency, on 26 th November 2001 Nepal was declared in

state of emergency and Royal Nepalese Army (RNA) was deployed to remote areas of the

country which were considered as stronghold of the rebels. During the period of this crisis

more than 13,000 people including state forces, insurgents and innocent civilians lost their

lives and an estimate of 200,000 people had to be internally displaced in violent conflicts in

various regions of the country; mostly remote villages of Far and Mid Western

Development Regions (US Agency for International Development, 2007)14. This internal

conflict, frequent strikes, political instability, and power shortage- these entire factors

contributed to economic stagnancy.

Nepals economic growth sustained major setback, and was not able to achieve

targeted 5 percent growth in the fiscal year 2010/11. In the fiscal year 2010/11 the economic

growth rate was estimated to be 3.5 percent. The apathy in non agricultural sector, labor

related issues, ever increasing demand of electricity and low supply, decrease in expansion

of bank credits, and slow remittances were reasons behind impede economic growth (MOF,

2011)15. In the context of agricultural sector, in the fiscal year 2010/11 it was estimated to

have witnessed growth of 2.9 percent in comparison with last fiscal year.

According to the Economic Survey FY 2010/11, Nepalese economy has seen slight

changes in the pattern of sectoral contribution in the Gross Domestic Product (GDP). The

primary sector which comprises of agriculture and forestry, fisheries and mining, and

quarrying which was estimated to be 36 percent was actually recorded to be 35.5 percent in

FY 2010/11. The contribution of this sector stood at 37 percent in FY 2000/01. Similarly,

the secondary sector, basically the industry group was estimated to be 14.1 percent with

decline of 2.8 percent while compared to FY 2000/01. The major reason behind this decline

14 US Agency for International Development (2007). Nepal HumanitarianAssistance Fact Sheet No. 1, June.

15 Ministry of Finance (2011). Economic Survey: Fiscal Year 2010/11, Vol.1,Government of Nepal

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is decline in contribution of manufacturing sub sector in the FY 2010/11 by 6.1 percent

causing the reduction of 3 percent in the entire sector. Meanwhile, the only sector which

showed some growth is the tertiary sector. This sector showed growth of 3.6 percent

standing at 49.8 percent while compared with FY 2000/01.

Figure 3-0-1 Sectoral Contribution to GDP

Source: Economic Survey FY 2010/11, MOF, Nepal

3.3 Employment and Poverty Alleviation

Most of the studies regarding the conflict in the country point to the fact that poverty

is the major cause for the decade long internal conflict in Nepal. Income disparity, gender and

caste discrimination, centralization of facilities in few major cities, ever widening gap

between the rural and the urban development, are just few catalysts which have acted to

elevate the conflict. Although according to the NLSS 2003/04, the poverty in the country has

been reduced by 10.91 percent between 1995/96 and 2003/04. The major actor for this

reduction being the remittances, there still exist the wide gap among urban and rural and

different geographical regions in the country. The poverty is inexplicably distributed t caste/

ethnicity, regional and occupational levels. The distribution of the population living the

poverty line is 67.0 percent and 11 percent in agro-based employment and agricultural labors

respectively.

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NLFS 2008 found out that the total number of currently employed persons increased

to 11779 thousands in 2008 from 9463 thousands in 1998/99. The employment to-

population ratio showed some decline (84.3 percent in NLFS 1998/99 to 81.7 percent in

NLFS 2008), but the proportion of paid employees showed an increment of 0.9 percent

between these two Labor Force Survey. Table 3-0-1 shows the major indicators and change

between NLFS 1998/98 and NLFS 2008.

Table 3-0-1 Major Indicators

Major Indicators Nepal Labor Force

Survey

1998/99 2008Total number of employed aged 15 years and above(thousands) 9463 11779

Males 4736 5519

Female 4727 6259

Employment to population ratio (15 years and more) 84.3 81.7

Male 88.3 85.5

Female 80.5 78.5

Paid employees as a percentage of total employed 16.0 16.9

Male 76.0 73.9

Female 24.1 26.2

Total time spent on all economic work activities (in million hours)

Aged 15 years and more 413 517

Aged 5-14 years 48 38

Average hours per week in the main job (15 years and more) 39.4 38.7

Male 42.6 43.1

Female 36.3 34.8

Percentage of employed individuals aged 15 years and above byhours worked:

0 hours 2.0 0.6

1-19 hours 8.1 11.220-39 hours 17.3 19.9

40 hours and above 72.6 68.2

Percentage of employed aged 15 years and above who worked lessthan 40 hours in last week by reason:

Involuntary reason 15.4 21.1

Voluntary reason 83.3 78.9

Average monthly earnings (Rupees)(cash and kind combined) ofpaid employees(15 years and more) 2143 5117

Male 2389 5721

Female 1368 3402Source: Nepal Labor Force Survey 2008, Central Bureau of Statistics, Nepal

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Regarding time related underemployment, underutilization and unemployment all

these factors have increase when compared with previous Labor Force Survey. The time

related unemployment rate for the population belonging to the age group 15 years and above

is 6.7 in NLFS 2008 while it was only 4.1 in NLFS 1998/99. 30 percent of the population

categorized as working group i.e. 15 years and above are underutilized and unemployment

rate has increased to 2.1 percent from 1.8 percent. The labor force is expected to grow by

400,000 annually in the labor market and the major challenges for the labor market and the

country itself is to accommodate this growing labor force and control growing unemployment

rate, underutilization of labor force and time related unemployment.

Figure 3-0-2 Economically Active Population and Underutilization by Region and Sex

Source: Nepal Labor Force Survey 2008, Central Bureau of Statistics, Nepal

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While NLFS 2008, showed that the country has been making significant progress in

terms of the total numbers currently employed population but in contrary the productive labor

force belonging to the age group of 20-24 years and 25-29 years have highest percentage of

underutilization respectively when compared with other age groups. The percentage of

underutilization of the age group 20-24 year stands at 46.0 percent while 24-29 years is 39.1

percent. The figure 3-3 illustrates underutilization of the population 15 years and above by

sex and age.

Figure 3-0-3: Percentage of underutilized population

Source: Nepal Labor Force Survey 2008, Central Bureau of Statistics, Nepal

According to the latest Economic Survey, opportunities for entrepreneurship, quality

skill development and creation of employment opportunities are drearily low and there is no

harmony between demand and supply. Nepal is currently dealing with the situation where the

execution of customary policies and laws cannot be effectively executed due to lack of

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measures for improving human resource and physical infrastructures of the labor offices.

Also, increasing threats to the business communities, issues of business related securities,

health related pollution standards, frequent labor strikes, and increasing power or pressure

from labor unions in the current context of the country are some of the major challenges. The

example of permanent shut down of Surya Nepal Pvt. Ltds garment unit in August, 2011 due

to agitation of workers of UCPN-Maoist-affiliated Nepal Trade Union Workers

Organization; resulting 600 and over employees to be jobless16; presents the current scenario

of industries in Nepal. The garment unit was established in 2007 as an extension of Surya

Tobacco Company and was one of the highest tax payers of the country.

To curb rising situation of the unemployment, poverty and inequality, and sustainable

peace in the country; the Government of Nepal (GON) had adopted different strategies to

achieve the objective of generating feelings of actual change among the people. The GON

with the collective efforts of private, community and cooperative sectors aims to attain

employment and poverty reduction oriented sustainable and broad based economic growth.

The current government formed by the Constituent Assembly election has focused more on

federal structure of the country and develop physical infrastructures to support inclusive and

judiciously equitable economic growth. The GON aims to improve economic growth and

encumber increasing unemployment by utilizing private sectors but the challenge a head is

the lawlessness situation being incumbent in the country. Four years have passed since the

Constituent Assembly election but still major political parties have not come to consensuses

regarding issues like rehabilitation of the Peoples Army (Maoist Army), rehabilitation of

disqualified minors who served in the Peoples Army and power sharing among the major

political parties.

16Published in The Himalayan Times, 2011-08-18, Surya Nepal shuts garment unit,

RSS News Agency.

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3.4 Education and Gender Issues

In past two decades Nepal has seen lots of political changes; from being a democratic

country in 1990 to the Federal Democratic Republic of Nepal in 2008. With these changes in

the countrys political scenario, the education system has also witnessed numerous changes.

The first education reform initiated by then elected democratic government in 1990 heavily

concentrated in developing primary education system of Nepal. With the help of donor

agencies and MOESs own resources two major projects BPEP 1991-2001 and PEDP 1992

were launched with the objectives of improving the primary education and developing trained

human resource for teaching. Nepal not only has focused in the conventional education

system but also has focused in developing skilled human resources through vocational

trainings and technical education. The formation of CTEVT in 1989 was a milestone in terms

of technical education and vocational trainings.

According to NLSS 2003/04, there has been improvement in almost all education

indicators between 1995/96 and 2003/04. The adult literacy rate has increased by 12

percentage point; the female adult literacy being higher than that of male. The significant

improvement can be seen for the population proportion of the aged 15 years and above that

ever attended school which is 46 percent for 2003/04 while it was only 34 percent in the

previous NLSS. The net enrollment rate (NER) for primary and lower secondary level have

gone up by 15 and 10 percentage points respectively while NER for secondary level has just

increased by 6 percentage points. There has been a significant improvement in NER at all

levels for females as NLSS 2003/04 shows that NER for females is higher than for males.

Though the NER and adult literacy rate has improved, one of the major challenges

faced by the Nepalese education system is increasing school dropout rate. Out of total

school/college dropouts for the population aged 6-24 years, 32 percent cited poor academic

progress, 27 percent reasoned the primary reason for leaving school as help at home while

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only 12 percent reported costly as the reason for leaving schools. Table 3-0-2 illustrates the

reason for leaving school/college for population 6-24 years who had attended school in the

past.

Table 3-0-2: Reason for leaving school/college for the population aged 6-24 years.

Source: Nepal Living Standard Survey 2008, Central Bureau of Statistics.

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Though there are still many challenges being faced by Nepalese education, but the

past efforts and investments made in this sector have helped to improve the situation.

According to the National Planning Commission 2011, the children enrolling in grade one

with the childhood development experience has reached about 50 percent, NER at the

primary level is at 93.7 percent, at lower secondary level it is at 63.2 percent and at secondary

level it is at 40.8 percent. Another important indicator that shows improvement in the

education sector is the improving situation of adult literacy rate which is at 53 percent and by

2011 the gender ratio was found to be nearly uniformity.

Although, the significant improvements in access and NER, the proportion of

population leaving school\college without developing their potential, and without acquiring

the basic skills and knowledge for uplifting their living standards is still at large. The School

Sector Reform Plan 2009-2015 (SSRP), aims to improve the quality and relevance of school

education. The SSRP is continuation to ongoing programs like Education for all (EFA),

Secondary Education Program, Community School Support Program, and Teacher Education

Project. Even though, the SSRP has envisioned significant changes in the education system of

the country, the major drawback is that with its current level of funding i.e. USD 4.040

billion it will still not be able to achieve the objective of EFA and Millennium Development

Goal by 2015.

While increasing school/college dropout rate is one of the major challenges faced by

Nepalese education system, inclination of the conventional education towards clerical job,

lack of liaison between the education and the markets demands are some other reasons

working as catalyst to widen the unemployment gap. The amalgam of these two factors,

Nepals labor force lacks both education and skills needed to productively sustain their

livelihood and to earn a decent income. Access to and provision of technical and vocational

education is extremely limited: for example, every year 300,000 young people join the

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national workforce without any systematic preparation for work, while in contrast only about

50,000 (as of 2007) were given a chance to participate in some sort of TEVT or skill

development, and most of the courses are short term courses17. Table 3-0-3 illustrates the

duration of short term vocational trainings, the total output, and training providers including

Bi-lateral and Multi-lateral agencies.

Table 3-0-3: Short Term Vocational Training Providers in Nepal and Yearly Output

Vocational Training Providers and

Agencies

2008 2009 2010

Female Total Female Total Female Total

VOCATIONAL TRAINING (390Hours or More)

7521 30283 20653 53595 27112 68470

GOVERNMENT AGENCIES 3992 12074 7105 17262 15424 32406

1 CTEVT/Technical Schools 404 1552 541 1850 678 2120

2 CTEVT Skill for EmploymentProject (Central level)

756 2452 5864 8267 15526

CTEVT Skill for Employment

Project (Community Level)

161 419 1701 4085

3 Vocational and Skill DevelopmentTraining Centers, DepartmentLabor

2651 6124 3789 7713 4462 8825

4 National Academy of Tourism andHotel Management (NATHM)

181 1399 162 1416 316 1847

Bi-lateral and Multi-Lateral Agencies 231 398 10209 17900 8502 18922

1 ILO/Jobs for Peace 252 784

2 UNIRP 6 355

3 USAID/EIG 167 324 1925 3489 2352 4236

4 HELVETAS/ EF 5821 13464

5 German International Cooperation(GIZ)

64 74 114 202

Source: CTEVT (2011). A profile of Technical Education and Vocational Training providers.

17 CTEVT (Council for Technical Education and Vocational Training) (2008), Aprofile of Technical Education and Vocational Training Provider,Nepal.

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Though all the national level survey points out the fact that gender, caste and ethnicity

inequality have decline, they still constitute an enduring form of social inequality despite

national legislation that outlaws caste discrimination18. Nepals gender development index in

2004 was at 0.27, which was worst comparing to neighboring countries like Bangladesh,

India and other developing countries19. These studies suggest that the caste, gender and

ethnicity discrimination still prevails in Nepal.

18 Stash, S. & Hannum, E. (2001). Who goes to school? Education stratification by

gender, caste and ethnicity in Nepal. Comparative Education Review. Vol. 45, No.3, pp. 354378

19 Ojha, D. P. (2004). Inventory of Poverty and Impact Monitoring (PIM) Approachesin NepalPoverty Monitoring Unit, GTZ, Nepal

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CHAPTER 4

FRAMEWORK OF ANALYSIS

This study tries to examine whether the education level of parents have negative

effect on the labor participation and whether gender disparity still exist in the labor

participation of Nepal. The paper will also try to examine the pattern of labor participation in

terms of regional and geographical differences. The model consists of four variables and

eight dummy variables including dummy for participation in the labor market. As for a binary

dependent variable: the Linear Probability Model (LPM) the dummy for labor participation

will be dependent variable while parents level of education, parents living together,

childrens education level, sex of child, monthly salary and ethnicity will be explanatory

variables. Similar variables will be used for pooled cross sectional data analysis. Moreover,

year dummy, sex of labor force participants dummy, annual labor hour and log of monthly

salary or wage will also be used for empirical analysis.

According to age group categorization by NLSS 2008, the active population or the

population belonging to the working age group is 15-60 years while population belonging to

age group of 14 years and below, and 61 years and above are inactive population. According

to the International Labor Organization, children who are working for money belonging to

the age group of 10-14 years are considered as child labor. Due to existing poverty and high

dependence in subsistence agriculture in Nepal, the population proportion belonging to age

group 14 years and below is also engaged in the labor market, directly or indirectly. The fact

that child labor exist in Nepal, the scope of the study is to analyze labor force participation

behavior only.

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The pooled cross sectional data obtained from the Nepal Living Standard Survey

conducted by Central Bureau of Statistic, Nepal in 1995/96 and 2003/04 has been used to

construct the model.

4.1. Model Specification

..(1)

..(2)

..................................................(3)

Where,

Inlf_childt = Labor participation of children

Fatlivingt = Father living together at home

yearoffath_educ t = Dummy for fathers schooling higher than 10th Standard

Motlivingt = Mother living at home

yearofmothschooling t = Dummy for mothers schooling higher than 10

th

Standard

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ethnicityt = Ethnic group

child_edut = year of schooling of children

annual_lanorhourt = Total annual hours worked

lwaget = Log of monthly salary

femalechild = Dummy for female child

year03t = Year Dummy

female03_child = Dummy for female child alive in year 2003

t = Time

t = Error term

4.2 Data Analysis

The study is focused in determining the labor participation behavior using the pooled

cross sectional data. The study also tries to find the gender disparity in the labor participation

based on type of industry chosen to work.

Table 4-0-1: Descriptive Statistics

Variables Mean Std.

Deviation

Minimum Maximum Number of

Observation

inlf_child 0.933 .254 0 1 30

Fatliving 0.5 .508 0 1 30

yearoffath_educ 0.334 0.183 0 1 30

motliving 0.5667 0.504 0 1 30

yearofmothschooling 0 0 0 0 30

sex_ofchild 1.5 0.589 1 2 30

child_edu 5.6 5.097 0 18 30

annual_laborhour 859.033 948.977 6 3600 30

lwage 8.005 0.699 6.62 9.21 30

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ethnicity 17 23.098 1 76 30

The above table shows the descriptive statistical values of the selected ten variables.

The mean, standard deviation, minimum value, maximum value and the number of obviations

for each variable are present in the table 4-0-1.

4.3 Expected Signs of Coefficient

Considering the fact only 1.92 percent of fathers have attained schooling above 10 th

standard and similarly only 0.47 percent of mothers have education higher than 10th standard

in the sample. Also the sample considers the age group of children between 0 years to 20

years and only 5.01 percent has attained schooling above 10 years. The paper anticipates that

the effect of parents education especially fathers education will be negative in the labor

participation which means that children are encouraged to pursue education.

4.4 Empirical Results

The empirical results are presented in the table 4-0-2. The study analyzed the effect of

parents education on the childrens behavior in labor force participation. It has also analyzed

the gender gap between the base years 1995/96 with 2003/04 in labor force participation. The

table 4-0-2 shows the linear probability model of the study.

Table 4-0-2: Result from Regression

Independent Year 1995/96 Year2003/04

Female Child Male Child Female Child Male Child

Constant.681*(.129)

.797*(.154)

.676*(.123)

.565*(.158)

fatliving.0685(.166)

.255(.389)

-.103(.157)

-.324*(.114)

Yearoffath_educ.224**(.095)

-.471(.361)

-.555**(.227)

.708*(.118)

motliving-.147(.167)

-.358(.373)

.069(.150)

.139(.118)

.244 - - -

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yearofmothschooling (.169)

Child_edu.019(.016)

.010(.015)

.042*(.0125)

.033**(.013)

ethnicity.002(.003)

.002(.002)

-.007(.004)

.004(.003)

Note: (1) Number in parenthesis is standard errors.

(2) *** 10% significance level, ** 5% significance level, and *1% significance

level

Table 4-0-3 Pooled Cross Sectional

Dependent Pooled Cross Sectional with base year 95

Coefficient Standard error

Constant -.105 1.090

fatliving -.155 .208

yearoffath_educ .175 .228

motliving .246 .287

yearofmothschooling - -

ethnicity -.0002 .0012

Child_edu .022 .017

Annual_laborhours 6.02e-06 .00005

Lwage .118 .123

femalechild -.116 .093

Year03 -.076 .096

Female 03_year -.064 .264

From the empirical analysis the study found that the fathers education level has

significant impact in the case of labor participation. The result from table 4-0-3 shows that for

female child the coefficient of fathers education level i.e. higher than 10 years of schooling

is significant at 5% whereas in case of male children the coefficient fathers education level is

negative in labor participation and is insignificant for the year 1995/96. Thus we can infer

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that fathers education level has negative effect in labor participation for male children

implying that sons were preferred to be sent to school while daughters were prevented from

going to school and were engaged in household activities as suggested by the study

conducted by Sharon Stash and Emily Hannum (2001)20.

The table also shows that mother living together in case of both female child and male

child has negative impact but insignificant, which can be interpreted as that mother will

encourage both children to pursue education rather than engaging them in household chores.

The result of the year 2003/04 shows little improvement in case of labor participation

behavior of children. Fathers education level and living together have negative impact in

labor participation despite of the sex orientation of the child, but both the independent

variables are significant at 1 percent for male child; whereas in case of female child fathers

education only is significant at 5 percent. The result also shows that child education level has

positive impact in labor participation behavior which is consistent with the traditional

behavior of labor participation i.e. higher the education attainment more human resource

participate in labor market.

In the case of ethnicity, it has negative effect in labor participation in the year 2003/04

and is insignificant for female, which can be interpreted as the class discrimination and

gender disparity was prevail then and male children from higher caste were not engaged in

work like household chores.

Though the pooled cross sectional data analyses do not have any significant values

but looking at the gender gap it has increased over the years. This could be the effect of

female children being barred from going to school previously, resulting in unskilled female

human resources which cannot compete with men who had privilege of school education

20 Stash, S. & Hannum, E. (2001). Who goes to school? Education stratification by

gender, caste and ethnicity in Nepal. Comparative Education Review. Vol. 45, No.3, pp. 354378.

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previously.

CHAPTER 5

CONCLUSION AND POLICY IMPLEMENTATION

This paper is an attempt to relate parents education with how it affects the children

behavior in labor participation. Though numerous efforts have been attempted, the study

showed that there is still gender gap and female child is still being engaged in household

chores than boys. Though the result of 2003/04 shows that the fathers education level has

negative impact on the labor participation behavior of child despite of the sex orientation, the

problem of ethnicity still prevails and with the increasing population to eradicate gender

disparity might be a distant dream and objective of the MOE. Though SSRP aims to bring

down the gender disparity in term of school going children in all level but as long as the

parents are not aware and concerned about their childrens education especially for girls this

problem will still exist.

The study conducted by the World Bank, Poverty Reduction and Economic

Management Network, Gender and Development Unit in 2001, has shown that during the

conflict females were much more pressurized to work as male were either engaged in

Peoples Army or had migrated due to fear and/or to find job in other countries. The increase

in female participation in labor force and decline in the numbers of male could also be

considered as an indicator of what the study conducted by the World Bank had concluded.

Nepal is now in a transition phase and all political parties have agreed that the country

is in dire need of sustainable peace. The issues of representation of gender, ethnicity, and

inclusiveness are constantly being raised and hopefully will be incorporated in the upcoming

constitution. Though empirically the study is not able to establish that there exist disparity

among male and female due to insignificant result, but numerous studies support the claim.

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This is just an attempt and further more has to be done to understand the labor

dynamics of Nepal. The data constrain, ambiguous and confusing interpretation of same

results by the different government agencies of the country are some of the challenges faced

while conducting this study. However we can say that parents have enormous impact on the

education and labor participation thus policies have to be made to ensure that parents are well

aware and not withholding children due to poverty form getting education. To meet MDG,

GON also needs to consider how parents perceive about education when 40 percent of the

total population is below poverty line.

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APPENDIX

Figure 5-0-1: Map of Nepal with Sample points