Nepal: Development Issues and Labor Economics

Hari Uprety

Senior Journalist, Nepal

Labour Economics:

When workers unite it helps them assert their rights, as a huge mass of people invariably creates pressure whenever needed. But when such groupings start taking political dimensions new priorities emerge, sometimes leading workers away from working for their rights alone. On the other hand, at the firm level, or in terms of microeconomics, workers are considered to be just another input factor, which is best if it costs the least to employ them. Unionism is not good news for the firm and it shies away from places where unions are strong. If laborers only ask for what is right and managements do not try to exploit them, then things can go on smoothly. But then, if this was the case anywhere, unions would not have been necessary at all. Since the workplace is not utopia, some sort of labor-management dispute always exists.

In Nepal’s case, where unions are just realizing the amount of power they can exert, they have only been finding out now that to acquire labor rights is not as easy as organizing strikes and closing down factories. Long-term labor interest is more than that. A case in point is the jute mills at Biratnagar, where strikes went on even when the company was deep in financial troubles. It was later that laborers found out that the factory was about to shut down. Had laborers been more aware of their own situation, they might have tried to reform the management, instead of asking for pay rises, early on. Finally, the only way out for workers was to agree to work for what little they got, even less if need be, if they were to keep on working in a country where unemployment ‘is certain if you lose your only job.

Labor assertiveness does not always pay in a country ridden with massive unemployment. It only gives them additional responsibility, which should actually have been borne by the management. In countries where unions have been playing a dominant role, like Germany, workers have been taking that responsibility.

They work hard to justify their demands under prevailing conditions and they usually come out successful in furthering their rights. Other countries have not been so lucky with their unions. In Nepal, they are learning by doing.

A recent case of the Nepal Bank might be one more mistake that needs to be rectified by labor unions in the long run. After a long dispute with the management, the bank workers were finally able to wrench some benefits. One can easily justify the laborer’s demands by pointing one’s finger at the employees of private banks, who have better working conditions. If the management was more careful, it could have pointed back at the efficiency of employees of the same private banks. Of course, a worker should be given the maximum incentives possible, but not when the firm is already reeling with the burden of inefficiency. The banking environment is getting so competitive that such short -sightedness could prove to be the undoing of the bank itself. In the end, workers may have to follow the footsteps of the jute mills laborers. Therefore, workers should not only look at their empty pockets before demanding more money. The management’s ability to cater to their needs is equally a subject of the worker’s study.

There are other constraints too, like the market environment in the industry they are employed with, the condition of the economy, economic policies, etc. etc. The more assertive they become the more they will need to do their homework. Sometimes, the environment could be so poor for fulfilling their demands that not only will they have to remain satisfied with what they have, but, in fact, accept even less pay for their longer term interests. The case of the jute mills is a good example. It is this precarious position of the laborer that labor economics tries to explain. It gives an idea about the scope and constraints the laborer faces in the marketplace. Several training programs have been organized to acquaint laborers with their actual position in the economy. One of them also tried to teach workers to prepare themselves in the best way to deal with labor-management relations.

The laborers should acquaint themselves with the shortcomings of the economy, the capabilities of a government under specific circumstances, the economic policies and their status in implementation and the condition of the international market, if they want to justify their demands. Furthermore, they should be able to calculate how much they have and how much more they can justifiably have. They should be able to understand and predict their firm’s position’ under the given circumstances. In other words, they should be experts in their own affairs. This is a demanding schedule for the Nepalese laborer where educated workers are very rare. To make matters worse, all the data the laborer has to study and understand are not readily available. The authorities responsible for providing the information on labor issues are themselves not aware what they should be doing. Even if they are, they cannot do so due to one reason or the other. For example, a labor specific consumer price index, a vital instrument for the laborer before he makes a pay rise demand, is not to be found anywhere in the country. Data on labor issues are lacking to such an extent that theoretical assumptions made in labor economics have no chance of being tested in actual life.

Even if all the information was available to the laborer and all measures taken by the government were predictable and transparent, they would not have provided the laborer with enough ammunition to assert their rights. The condition of the Nepalese economy is such that it is heavily weighed against the laborer. The fact that Nepal has open borders with populous and large countries seems to have escaped the trainers who were trying to make laborers aware of their situation in the Nepalese economy. With free movement of labor between disparate economies, any sensible policy can go haywire. And Nepal is no exception to that. One might close a few floodgates with good policies to benefit the laborer but if labor can move freely through borders there is no need to close floodgates, because there exists no dam.

Talk about the need to do something about laborers in the garment industry, a vital sector of the economy, and you will end up without any benefit for the Nepalese laborers because most of them are not from Nepal. Such anomalies only hamper the laborer’s cause. The whole economy does not respond to policies, no matter how sound they are. Things could get clearer for the laborer in these murky circumstances, if the labor training program includes this vital aspect of labor economics, because if things look impossible for the workers, it will be futile to tell laborers that too much politicking hampers their long term cause. When there is no long-term prospect, even short term benefits prove to be a good bargain. No wonder, politics has become a convenient way to achieve things.

The problem we have with our economy is not very unique in every aspect. Generally, it faces the same problems that other least developed economies face. Analyzing some of our peculiarities might help but much literature can be found to explain the general problems of least developed economies with an array of remedial prescriptions. We should rather focus on our own unique strengths and weaknesses.

Only then can we prove ourselves to be a big help in policy making. Bringing together, related studies and similar development efforts in other parts of the world also help, but there are our own unique situations that need further probing. Tourism is a good example.

Although ours is not a very big industry, tourism has a uniqueness in Nepal that has never been studied properly. Remedial measures prescribed for others do not necessarily apply in the Nepalese context. We need our own. With such a long history in tourism, we should now be manufacturing our own tourism gear, opening up schools for climbing and rafting, wild-life study centers, promoting high altitude sports and the like. It is to be noted that other countries have started using our experience in tourism, as their guide. How we should be using our own experience still eludes us.

Similarly, one must touch upon the hydropower potential as an area waiting to be exploited. Again, the question is how. Nepal has always given high priority to hydropower exploitation, but it is increasingly finding itself subjected to power blackouts; not to mention the possibility of exporting power. (Now 56 hours a week). The real issue in hydropower development is the externalities that arise with each project proposal. As if that is not enough, there is an increasing band of people within the country bent on halting government efforts right on track. They have their own reasons for doing so, but there should be ways to accommodate these people’s aspirations while also developing the hydropower industry to benefit the country.

Text courtesy: NEFAS publication “Development Strategy for Nepal”. Thanks NEFAS.

Some more will follow next week: The article though had been written some fifteen years ago yet it is still relevant: Ed. 

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