INTERNATIONAL JOURNAL OF BUSINESS POLICY AND ECONOMICS

Vol. 4, No. 1, (2011) : 51-64

SOCIO-ECONOMIC INEQUALITY: AN IMPLICATION FOR

MANAGING LABOUR MARKET
Shyam Bahadur Katuwal
Associate Professor, Faculty of Management, TU,
Post Graduate Campus, Biratnagar, Nepal

This paper, by using secondary data and descriptive cum analytical analysis
method, attempts to examine the linkage between human capital deployment
expressed in terms of education, labour market employment and poverty. Most of
the data were derived mainly from the Nepal Living Standard Survey 1995/96
and 2003/04. The analysis of the data explores the fact that an increase in human
capital defined in terms of educational attainment results in an increase in
employability of people and subsequent increase in income and thereby reduce
incidence of poverty in cyclic order. Correlation analysis indicates that there is
strong positive relationship between education and income and the employment
sector that could generate high income. Impact of such positive relationship is
reflected in the reduced incidence of poverty among the social class whose
educational status is better than other castes and ethnic groups. However, the
analysis of the data further shows the disparity in educational attainment of
different social groups with its concomitant impact on the level of poverty and
per-capita income level of the groups.
In this study, the national poverty level seemed to be declined dramatically by
11 per cent during the period of 1996 and 2004 even in the slow pace of economic
growth. Nevertheless, about one-third of Nepalese people( in aggregate) have been
living in those household which per capita expenditure for food and nonfood
items is lower than required to purchase the minimum caloric requirement and
other basic need items. It indicates that there is no symmetrically decline of poverty
among different castes and ethnic groups. The rate of poverty decline is very fast
(by 46 per cent) among the upper caste groups (Brahman/Chhetri) and lowest in
lower caste/ethnic groups – Muslims (6 per cent) followed by Hill Janajati
(10 per cent) and Dalits (21 per cent). The poverty level is lowest in Newar
(14 per cent) than other community and highest in Dalits( 46 percent) and Hill
Janajatis (44 per cent). The asymmetrical distribution of poverty is caused by
disparity in education and employment pattern of different castes/ethnic groups.
Groups with high educational attainment have lowest tendency of being poor
(e.g. Newar) and the groups with lowest educational background tend to be poorer
(e.g. Dalits). It is also true in case of the occupational affiliation of social groups.
People with high social rank are found involved in those occupations that could
generate more earnings by either self-employment or wage employment. In this
juncture, this study observes that the castes/ethnic groups involved in agriculture

* Corresponding Author: E-mail: skatuwal@bcn.com.np/shyam_katuwal@yahoo.com

Com-1-D: \ Vijay Jha - (SSM) - 2011 \ 005-IJBPE, 4(1), (2011) \ S S. Mukherjee

52 Shyam Bahadur Katuwal

sector are poor than the castes/ethnic groups involved in professional jobs, trade
and service sectors. In this moment, Newars followed by Brahman/Chhetri are
in better position than others in respect to income (low level of poverty) as their
concentration is more in these sect their life, and always remain rich and educated
than other groups of people.
In such a situation of disparity in education, poverty and employment across
the castes/ethnic groups, almost all sections of the society should be equally
developed to make the country prosperous. For this, the study on the basis of
findings suggests government to pay full concentration to uplift the educational
status of all kinds of people with the help of donors and civil society to manage
the growing need of labour market requirement and reduce poverty and inequality
of all kinds in the developing countries like Nepal.

1. INTRODUCTION
In the scenario of social and human development prospect, Nepal is always
behind from the rest of the world. As per the Human Development Report Nepal
2009, Nepal has recorded 0.553 point of human development index, with the
growth of 0.019 points than previous year (0.534). However, the positional rank
backed to 144 places from 142 in previous year (UNDP, 2008 and UNDP, 2009).
According to the report, the pace of human development of Nepal is very slow
than most of the countries listed in the HDI. In South Asian context, it places
third last position in human development index – two steps ahead of Afghanistan
and one-step of Bangladesh. The comparative picture of human development
report indicates that though Nepal has achieved in some human development
parameters, it has to bring fastest economic growth to meet other countries in
the race of development.
In employment, agriculture alone provides employment to 66 per cent followed
by service (22 per cent) and industrial sector (12 per cent) of the 23.15 million
population of Nepal (CBS, 2003: 353).
Among others, remittance income is major source of reducing poverty in
Nepal. About one billion rupees in the form of remittance (in increasing trend)
is adding in the national income of Nepal every day. Consequently, the share of
households receiving remittance is increased from 23 per cent in 1996 to 32 per
cent in 2004, with the relative increase in household income from source of
remittance. According to the Nepal Living Standard Survey (NLSS), 1995/96
and 2003/04, the remittance income has increased from NRs. 3500 to NRs. 6000
per households from the year 1995/96 to 2003/04 (The World Bank, DFID &
ADB, 2006 and CBS, 2004). During the period, the average agricultural nominal
daily wages is also increased along with the growth in the non-agricultural
wages in Nepal. Agricultural wages is increased from NRs 40.23 to NRs 75 over
the last decade (CBS, 1996 and 2004).
In fact, the development process of Nepal has been interlaced with social
composition and locational pattern of the country. Nepal is stratified into more
than 100 castes and ethnic groups depending on their religion, ritual norms,
socio-cultural practices and occupations. Sometimes it becomes very difficult to
demarcate between the castes and ethnic groups as some ethnic groups belong
to a number of caste groups along with the regional variation (Hill-Terai).
Socio-Economic Inequality: An Implication for Managing Labour Market 53

Whatsoever, studies have shown a significant variation of different castes and

ethnic groups in the matters of occupational choice, income, human development,
educational attainment, access to resources, health care services and decision-
making bodies of the government and so on ( UNESCO,2006; WB, DFID &ADB,
2006; DFID &WB, 2006 and ADB, DFID & ILO,2009, UNDP, 2009).
Despite different reform programs initiated in the past, Nepal’s economic
development performance has lagged behind that of other South Asian countries.
The disparity across the different social groups has been considered as a critical
constrains of the economic growth and development of the country (ADB, DFID
and ILO, 2009). Though the reduction of poverty is in progressive direction,
reducing from 41.8 per cent in 1956/96 to 30.8 per cent in 2003/04, the declination
of poverty varies across the caste/ethnicity, location and geographical regions.
The inclination of the decrease in poverty is highest for Brahman/Chhetri,
followed by Terai Janajati and other minorities. However, rate of poverty decrease
is lowest for lower castes/ ethnic groups in Nepal.
Whatsoever, in an aggregate, one-third (30.85 per cent) of population are
still compelled to live below the absolute poverty line (person who fails to earn
at least $ 1 per day). By Living Standard Surveys 1995/96 and 2003/04, the
incidence of poverty in Nepal seems to be reducing both in urban and rural
areas and all castes / ethnic groups with concomitant effect in the national level
poverty. Nevertheless, the NLSSs surprisingly reveal a significant inter-group
inequality in the distribution of consumption based poverty, which is measured
in terms of Gini-Coefficient, in spite of the decrease in poverty of all groups.
The Gini Coefficient has been increased from 0.34 in 1995/96 to 0.41 point in
2003/04, indicating growing trend of inequality.
The profile of poverty (poverty headcount rate) is highest among the people
living in rural areas (34.6 per cent) than urban areas (9.6 per cent). Similarly,
on ground of caste and ethnicity, Dalits (45.5 per cent) followed by Terai Janajatis
(35.4 percent) and Hill Janajatis (44 per cent) are severely suffered from the
problems of poverty than other castes like Brahman-Chhetri (18.4 per cent).
Comparatively, Newars are in very good position in the poverty measures, only
14 per cent of them were found living below the poverty line (CBS, 2004).
Thus, the high incidence of inequality in poverty across the caste and ethnic
groups clearly indicates that there is greater discrimination in the access to the
productive resource and the components of human development. Because of
which, all groups of the society are not in a position to earn the sufficient
disposable income equally required for the purchase of basic needs items for
their livelihood due to lack of education required for income generating
employment. At the same time, there is mismatch between the number of school
and college graduates we produce and the job opportunities we make available
to them (Khaniya, 2007).

2. PROBLEM
The World Bank (1999:1) has considered education as a single most important
element to development and poverty alleviation. It is the key to individual and
national development (Fabunmi, 2006). Fabunmi also explains that education
54 Shyam Bahadur Katuwal

enterprise is a very significant one to any nation, community or people as it is

the bedrock for progress and development. In this sense, “Better educated people
have a greater probability of being employed, are economically more productive,
and therefore earn higher incomes” (Berg, 2008, p. 3). Presently, despite of many
efforts for inclusion, the educational attainment is unevenly distributed among
various social classes in Nepal like in other developing countries and poverty as
well. Most of the people of the age of study either do not admit in the schools,
colleges or vocational institutions or stop their study without completing the
study level especially because of economic problem. Consequently, differences
in different aspect of human development across the castes are observed
apparently in Nepal (UNESCO, 2006). Thus, the present study quarries:
• Does incidence of poverty differ across the caste/ethnicity?
• What is the magnitude of poverty among the groups?
• Are there differences in educational attainment of different castes and
ethnic groups?
• Is there significant relationship between education level, incidence of
poverty and employment of different castes/ ethnic groups?
• What will be the possible policy measures to eliminate caste-based
inequality from the country?

3. CONCEPTUAL FRAMEWORK
Human capital indicates combination of all physical, intellectual and
psychological capacities of people (Todaro and Smith, 2003). Human capital
implies skill and knowledge that can be acquired by an individual through quality
education and training. From the managerial point of view, human capital can
be considered as an economic commodity and marketed as economic capital.
Since, higher level of human capital enhances the employability of individual
with higher level of skills in the labour market; the individual can demand for
higher remuneration for his/her level of skills and education. Education increases
an individual’s human capital, which, in turn, increases the efficiency of people
(Rees and Shah, 1986). D’Souza (2008, p. 783) argues, “An increase in human
capital initially results in an increase in self employment as the efficiency of
such production is enhanced with the improved managerial ability associated
with higher education. Subsequently, increases in human capital increase the
compensation to labour and cause the shift towards wage employment”.
Educated people have sufficient access to good jobs and they have always
been found well compensated than the people of lower level of education or
illiterate people. Lower level of education among the workers creates limited
access to good jobs in the organized sector and confines them to mostly casual
manual work (NCEUS, 2007). It happens so because, as human capital of a
person defined by the educational attainment increases, efficiency and
managerial ability of the individual increase with subsequent increase in income
generating capacity from self and wage employment activities along with
increase in employment opportunity in the labour market.
Socio-Economic Inequality: An Implication for Managing Labour Market 55

The impact of education on earnings and thus, on poverty works largely

through the labour market, though education can also contribute to productivity
in other areas, such as peasant farming (Orazem, Glewwe & Patrinos, 2007, p. 5).
The study made by Ferreira & Litchfield, (1998, p. 32) in Chile reveals that the
difference in household income between one quarter and one-third of household
income can be explained by the level of education of household heads. Since
employers, in general, use educational attribute as an important criteria in the
selection process of a candidate in a job and the base of potential productivity of
their employees. Human capital theories also support this presumption of
association between education and productivity. Human Capital theories (by Ggary
Becker, Mark Blaug and like) state that education creates skills, which in turn,
facilitates for higher level of productivity amongst those who possess the skills in
comparison with those who do not pose the required education and skills. Thus,
education is the major attributes to build human capital and the source of
employment and reduce poverty as explained in the Diagram 1.
Diagram 1
Interrelationship between Education, Employment and Poverty

Employment Education Poverty

(Labour Participation) (Educational Attainment) (Consumption-based income)

The Diagram 1 states that education and training programs induces

employability of people, and employment (absorption of labour force in the
market), in turn, enhances the capacity of purchasing the minimum caloric
requirement and other basic need items. Increase in income level, on the other
side; make people capable to obtain such education and training that increase
employability of people.
4. RATIONALE
Human capital development, explained in terms of educational attainment, is
one and only practical means of increasing opportunity in labour market and
income level of people. Prevailing discrimination among the people can be
eliminated by reducing poverty through the creation of employment
opportunities and earning capacity through educational empowerment in the
developing countries like Nepal. Human capital theory considers education,
whether it be formal or on the job, as investment in human beings. Improvement
in education is the catalyst for the overall development of the country. Education
does not only enhance the productive capacity (skill) of human resources but
also creates employment opportunity of individual.
In alternative way, education raises the income level and the increase in
income level, in turn, increases the tendency of schooling. Thus, human capital
development is to be considered as a two edged sword of eliminating poverty and
enhancing education status of people and then eliminating different kinds of socio-
economic discrimination in the society. As education enhances the ability to
upgrade skills, causing increased productivity and then earning more than those
56 Shyam Bahadur Katuwal

of with less education, it may reproduce different economic classes. Thus, education
should be judged as a factor of reproducing or reducing economic hierarchies in
the society. This is the rationale of the study, which attempts to justify the
relationship between educational attainment and income discrimination across
the castes/ethnicity in Nepal as a lesson to developing countries.
5. OBJECTIVES
Based on the backdrop of inequality, keeping education in the centre, this paper
attempts to highlight the extent of inequality among the different castes/ ethnic
groups in terms of socio-economic variables like poverty, labour participation
(employment) and education. Assuming education as the root cause of the
inequality, the paper also highlights the interrelationship of education with
poverty and employment within the social classes. By the output of this
relationship, the paper also assumed to suggest appropriate measure to be taken
into account to eliminate socio-economic discrimination and make the country
inclusive for development process in the developing society like Nepal.
6. METHODS
Data source of the study were all of secondary data generated by various
organisations. The data on labour market (employment), human capital
(educational attainment) and income (poverty incidence) derived from the
Human Development Report Nepal 2009, the Living Standard Surveys I & II
and the report of WB, DFID and ADB (2006).
For the calculation of the relationship among the variables, the cross
sectional data on employment, education and poverty of different castes/ethnicity
were generated from the source and correlation and descriptive statistics were
calculated manually. Based on literature, the castes and ethnic groups were
classified as Brahman/ Chhetri( Hill -Terai), Terai middle caste ( Yadava), Dalits
(Hill- Terai), Newar, Hill Janajati, Terai Janajati, Muslims and Other Minorities
groups for the comparison.
7. RESULT AND DISCUSSION
7.1 School Participation Rate (SPR)
The SPR – also known as attendance rate varies across the castes in Nepal. The
net SPR is very poor among the Dalits as compared to other castes in Nepal.
The net attendance rate at primary school education is observed highest among
the children from Brahman, Chhetri, and Newar households, which varies in
between 86.8 and 93 per cent against the 73.5 per cent national rate. It is lowest
among Muslims (32.1 per cent) community fallowed by Terai Dalits ((37.5 per
cent). However, the net SPR in the Hill Dalits is far better (i.e.73.5 per cent)
than Terai Dalits and equal to national figure. The basic cause behind the
difference in SPR between Hill and Terai Dalits is mainly because of the fact
that Hill Dalits are more integrated in hill society. Consequently, Hill Dalits
are less subject to discrimination than Terai Dalits are.
The SPR is terrible in case of secondary school education. In an aggregate,
only 30.9 per cent of secondary school age children attend in secondary school.
As in primary school education, the secondary education participation rate varies
Socio-Economic Inequality: An Implication for Managing Labour Market 57

from 44.6 to 52.3 per cent among the children of Newar, Brahman, and Chhetri
households. In case of Terai Dalits, the secondary school participation rate is
7.2 per cent and for Muslims, it is 7.9 per cent. Likewise, the net attendance
rate of Hill Dalits is twice as high as that of Terai Dalits.
7.2 Income and Consumption
Poverty incidence (absolute poverty) indicates the total number of population
living below the poverty line. As per the data in the Living Standard Survey I
and II, the incidence of poverty in Nepal seems to be reducing in all social classes.
The national poverty level seemed to be declined dramatically from 42 per cent
to 31 per cent in between 1995/96 and 2003/04 even in the slow pace of economic
growth. Similarly, the decline in poverty incidence could not be symmetrically
distributed across different castes and ethnic groups. Consequently, about one-
third of Nepalese people (in aggregate) have been still living in those household
which per capita expenditure for food and nonfood items is lower than required
to purchase the minimum caloric requirement and other basic needs items. The
data in theTable 1 shows the poverty status of different social groups in Nepal.

Table 1
Status and Change of Poverty in Nepal by Caste/Ethnicity, 1995/96 and 2003/04
(In Per cent)

Incidence of Distribution Distribution of

poverty of poor population
Caste/Ethnicity ‘95-96 ‘03/04 Change ‘95-96 ‘03/04 Change ‘95-96 ‘03/04 Change
Brahman/Chhetri 34.1 18.4 – 46 26.7 15.7 – 41 32.7 26.3 – 20
Terai Middle Caste 28.7 21.3 – 26 2.9 1.9 – 33 4.2 2.8 – 34
Dalits( Hill –Terai) 57.8 45.5 – 21 10.6 10.9 3 7.7 7.4 –4
Newar 19.3 14 – 28 2.5 3.4 35 5.5 7.5 38
Hill Janajati 48.7 44 – 10 19.7 27.8 41 16.9 19.5 16
Terai Janajati 53.4 35.4 – 34 10.4 9.2 – 12 8.2 8.1 –1
Muslims 43.7 41.3 –6 5.7 8.7 53 5.4 6.5 19
Other Minorities 46.1 31.3 – 32 21.4 22.3 4 19.4 21.9 13
Total 41.8 30.8 – 26 100 100 — 100 100 —
Source: CBS (1996), CBS (2004) and WB, DFID and ADB (2006).

Figures in the Table 1 clearly specify the discrepancy in the reduction of poverty
by castes/ethnic groups over the period of 8 years. The rate of poverty reduction
over the period was recorded faster in Brahmans and Chhetris than other castes.
The pace of poverty decline is very low among the Muslims and Janajatis. The
inclination of the decrease in poverty for Brahman/ Chhetri is recorded 46 percent
followed by Terai Janajati (34 per cent) and other minorities (32 per cent). However,
rate of poverty decrease is lowest for Muslims (6 per cent) and hill Janajati
(10 per cent). In case of Dalits, poverty is dropped by 21 per cent during the period.
Data in the Table 1 indicates that the per capita consumption levels in Dalit, Janajati
and Muslim households are lower than Brahman/Chhetri households. That means
the percentage of people living with required per capita expenditure for the purchase
of basic needs item is less in lower castes than upper castes.
58 Shyam Bahadur Katuwal

7.3 Education and Poverty

Literatures have stipulated negative relationship between education and poverty
incidence. The assumption is supported by the living standard survey data as
depicted in the Table 2.
Table 2
Poverty Change in Nepal by Education Level, 1995/96 and 2003/04
(In Per cent)

Incidence of Distribution Distribution of

poverty of poor population
Educational
attainment ‘95-96 ‘03/04 Change ‘95-96 ‘03/04 Change ‘95-96 ‘03/04 Change
Illiterate 50.9 42 – 18 72.9 70.9 –3 59.8 52.1 – 13
Less than 5 grade 35.7 28.2 – 21 15.1 16.8 12 17.7 18.4 4
6-7 grade 28.8 23.3 – 18 6.7 8.1 21 9.8 10.7 9
8-10 19.8 8.4 – 58 4.5 3.9 – 14 9.6 14.5 32
11+ 11.4 1.6 – 86 0.9 0.2 75 3.2 4.3 35
Total 41.8 30.8 – 26 100 100 — 100 100 —
Source: CBS (1996), CBS (2004) and WB, DFID and ADB (2006), r = – 0.990 (between education
and Incidence of poverty), significant at 0.01 level.

It is specified in the Table 2 that the consumption based poverty decreases

in the household heads that have primary or higher level of education, supporting
the presumption that higher is the education lower is the poverty or there is
reverse relationship between education and consumption based poverty
(r = – 0.990). The repercussion of the low attainment of education can be also be
found in the per-capita income (Table 3).
Table 3
Educational Attainment and Per-Capita Income by Caste/Ethnicity in Nepal
Adult Mean Educational Per capita
literacy year of attainment income (PPP Income
Caste/ethnicity (in per cent) Schooling index income in US$) Index
All Brahman/Chhetri 63.65 4.4 0.522 2027 0.5022
Terai Middle Caste 41.85 2,30 0.330 1119 0.4031
Dalits( Hill –Terai) 38.02 1.73 0.292 977 0.3804
Newar 68.20 4.66 0.558 3097 5730
Hill Janajati 53,81 3.05 0.427 1490 0.4509
Terai Janajati 48.11 2.81 0.383 1224 0.4180
Muslims 30.32 1.60 0.238 890 0.3648
Others 57.97 3.70 0.469 2227 0.5180
All Nepal 52.42 3.21 0.421 1597 0.4624
Source: UNDP (2009), Nepal Human Development Report 2009.
r = 0.916 (Between educational attainment index and per capita income), significant at
0.01 level.

In Nepal, household income has been found increasing over the period 1996
and 2004 (Table 1) despite the slow pace of economic growth (only by 2 per cent)
due to increase in the wages in agricultural and manufacturing sector, increase
Socio-Economic Inequality: An Implication for Managing Labour Market 59

in domestic production and increase in remittances from labour migration

(Hatlebakk, 2008).
However, unlike the reverse relationship between education and poverty
(Table 2), education has affirmative relationship with income level (Table 3).
The relationship strongly supports that increase in educational attainment leads
to increase income (r = 0.916) of different caste/ethnic groups from different
sources (like remittance, land or employment) and then increases national
income with reducing tendency in the absolute poverty from the country.
On the other side, data in the Table 3 illustrates the disparity in educational
attainment of different social groups with its simultaneous outcome on the level
of poverty (Table 2) and per-capita income level of the groups (Table 3). By the
Table 3, Muslims, Dalits and Janajatis (lower castes) lag behind the Brahman/
Chhetri (upper castes) and Newars in relation to the levels of educational
attainment and thereby their per-capita income. The repercussion of the low
attainment of education is also being observed in the occupational affiliation
(Table 4).
7.4 Labour Force Participation (Occupational Affiliation)
Data in the Table 4 shows the occupational affiliation (labour force participation)
of different castes and ethnic groups in Nepal.

Table 4
Sector-Wise Labour Participation by Castes/ Ethnic Groups in Nepal
(In Per cent)

Self-employment Wage employment

Caste/ethnicity Agriculture Manufacturing Trade Service Agriculture Professional Unskilled
All Brahman/ 78.9 1.6 3.8 3.3 1.5 4.4 6.6
Chhetri
Terai Middle 87.2 1.5 2.5 0.5 2.4 0.5 5.5
Caste
Dalits 64.6 10.6 0.5 1.9 9.0 0.6 12.9
(Hill –Terai)
Newar 45.7 8.5 14.1 6.4 1.9 7.8 15.6
Hill Janajati 80.3 2.3 3.0 1.6 4.0 1.2 7.5
Terai Janajati 77.2 0.8 2.7 1.7 7.8 2.0 7.9
Others 56.0 3.4 5.5 2.6 20.1 2.0 10.4
All Nepal 69.8 3.3 4.5 2.7 8.0 2.8 9.0

Source: CBS (1996), CBS (2004) and WB, DFID and ADB (2006).

As depicted in Table 4, about 78 per cent of labour force has made agriculture
(69.8 per cent self-employed in agriculture and 8 per cent agricultural labours)
as a source of their livelihood. Terai middle castes are found heavily involve
(about 90 per cent) in agricultural sector than other groups, whereas percentage
of Newars involved in agriculture is the lowest (47 per cent) among the employed
people of all castes/ethnic groups. While taking with poverty, Table 5, there is
high concentration of the poor in agricultural sector as compared to other jobs.
60 Shyam Bahadur Katuwal

The severity of poverty lies more onto the farm labourers (53.8 per cent) in
2003/04. They are poorest among the poor even within the agriculture sector.
By comparing the data of Table 4 and 5, we can clearly say that other minorities
followed by Dalits and Terai Janajatis are in a more vulnerable position of poverty
as their participation in labour force in the form of farm workers are greater
than other groups. The self-employed farmers have higher income than wage
earners do in agriculture. The income level is comparatively high among the
people involved in professional jobs, trade and service sector in the sense that
their incidence of poverty has been recorded to be 2.1, 11.1 and 14.4 per cent
respectively in the 2003/04 (CBS, 2004).

Table 5
Incidence of Poverty by Employment Sector of Household Head in Nepal
(In Per cent)

Incidence of Distribution Distribution of

poverty of poor population
Occupation ‘95-96 ‘03/04 Change ‘95-96 ‘03/04 Change ‘95-96 ‘03/04 Change
Self-employment
Agriculture 43.1 32.9 – 24 60.7 66.9 10 58.8 62.7 7
Manufacturing 41.4 31.2 – 25 3.4 4.5 32 3.4 4.4 29
Trade 32.2 11.1 – 66 4.3 1.6 – 62 5.6 4.5 – 19
Service 25.3 14.4 – 43 1.0 1.5 51 1.6 3.2 99
Wage employment
Agriculture 55.9 53.8 –4 15.7 10.9 – 31 11.7 6.2 – 47
Professional 8.3 2.1 – 74 0.4 0.2 – 53 2.2 2.9 35
Others 39.7 28.8 – 28 10.6 10.0 –6 11.1 10.7 –4
Unemployed 9.5 2.9 – 69 0.1 0.0 – 68 0.3 0.2 – 23
Non-active 30.5 26.9 – 12 3.9 4.4 14 5.3 5.1 –4
Total 41.8 30.8 – 26 100 100 — 100 100 —
Source: Calculated from NLSS I & II.

Thus, we can conclude that the castes and ethnic groups who are involved
mostly in agriculture sector are poor than the castes/ ethnic groups involved in
other jobs like professional activities, trade and services. In this juncture, Newars
followed by Brahman/Chhetri are in better position in respect to income (low
level of poverty) as their concentration is more in these sectors as compared to
other social groups. Consequently, they can afford for good education and enrich
their life.
8. CONCLUSION AND POLICY IMPLICATIONS
Overall, this paper identifies a strong linkage between social inequality, as
defined by the caste-hierarchy, educational attainment and economic poverty.
It indicates direct and positive correlation between human capital, defined by
educational attainment, and consumption income of people. The relationship
proves the presumption that better education enhances better employment
opportunities, which in turn, increases the bargaining power of workers in labour
market for higher wages and increases their consumption expenditure (income),
Socio-Economic Inequality: An Implication for Managing Labour Market 61

and thus reduces poverty. On other side, with the increase in income, people
can afford for good education.
Though the data on poverty incidence indicates decreasing trend of poverty
during the period of eight years in Nepal, there is massive inequality among
different castes/ethnic groups, occupations and educational brackets. The
concentration of poverty is greater in lower castes and ethnic groups whose
educational level is already low. Because of low educational status, they are
bound to accept agricultural occupation and unskilled jobs where earning is
very low as compared to other jobs. Consequently, they could not afford for good
education, thus, always lag behind from other groups in terms of education,
employment opportunity in high earning sectors like service and professional
occupation, and increase income level, and thereby reduce their poverty level
equally as of other castes forever.
In other aspects, the analysis of data specifies the presumption that
educational attainment has direct and positive relationship with the income
(r = 0.916) and negative relationship with the poverty (r = – 0.990).
Developmental constraints persist in Nepal until and unless it brings the
people friendly policies and programs that provide opportunity to every citizen
for equal participation in all aspects of development process. Thus, the outcome
of this relationship suggests us the incidence of poverty and income inequality
in the society can be reduced by raising educational attainment of people through
better policies and programs as given below:
1. Against the slogan for eliminating all kinds of discrimination from the
country, it could not be materialised due to weak implementation of
laws aimed to protect people from discrimination and disgust mind of
people towards lower caste. Thus, concerned laws should be amended
according to the public voice and carried out the effective programs to
bring favourable changes in the mind of people towards lower castes
through the active involvement of governmental and non-governmental
organisations.
2. There are large disparities in education in Nepal. People with no
education or low attainment of education face the problem of poverty
due to lack of opportunity in high-income generating jobs like
professional and services jobs. So that it is necessary to design policies
and programs that aid Muslims, Terai Dalits, and other educationally
disadvantaged groups to build an equitable and inclusive society and
thereby to achieve the Millennium Development Goals of education and
poverty of all classes by 2015.
3. For the establishment of equality in income distribution, it is necessary
to increase the per capita income level of people involve in agriculture,
in the form self-employment and wage employment, by increasing the
price of agricultural product and wages of the labour respectively.
4. Earning of the people of the self-employed in agricultural sector can be
increased by involving them in producing the crops that could yield
more output and could sell in the market easily with high price. For
62 Shyam Bahadur Katuwal

this, agencies concerned in uplifting the life of farmers should provide

effective training to them and help to search out the market to sell their
product easily with high prices.
5. Income level of poorer population like Muslims, Janajatis and Dalit can
be increased and reduced their poverty level by providing professional
training suitable to the present context of labour market and supporting
them to establish their own venture as well. I have to provide financial
and technical support for producing such goods and services which have
high demand and price in the local and foreign market.
6. Inequality in society experienced by people on the ground of their caste,
ethnicity, gender, religion etc can be eliminated by providing good
educational facilities and opportunities to those labour forces that are
out of the approach of education. For that, it is also necessary to make
education evenly approachable to all sections of the society.
7. If we have to reduce the disparity in the country, it is necessary to
uplift the educational status of people in such a way that the education
generates employment opportunities in both self-employment and wage
employment sectors and income as well for ever-growing number of
labour force.
8. The responsibility of the government of developing countries does not
complete only by establishing schools and colleges but also by
encouraging people to increase their enrollment at educational
institutions and also support them to continue their study until the
completion of the level of study.
9. The government has not to hesitate to allocate sufficient portions of its
budget to human development through the improvement in educational
status of people.
10. The area of education in which the government can invest the budget
for educational developments are: establishment of educational
institutions, development of modern curricula suitable to market
demand, development of teaching and learning materials and books,
investment in research works, scholarships, teachers training and
supervision etc.
11. Human capital development, capacity building and empowerment
programs and policies for those who are excluded from the national
scenario of development process should be launched effectively to
enhance the approach of poor community to employment opportunities
and thereby reduce poverty through increased income.
12. However, developing country like Nepal could not sufficiently invest in
educational development sector because of poor economies. It has to
scatter the limited budget in different sectors. In this situation, it has
to depend on foreign loans, aids and grants for the development of
education in the country. In such a situation, educational development
becomes the mercy of others. Thus, government has to increase the size
Socio-Economic Inequality: An Implication for Managing Labour Market 63

of budget to the education sector for the improvement of educational

status of disadvantaged community and thereby increase their
employment and reduce poverty.
13. To increase the size of educational budget and divert it to the educational
support to the disadvantaged community, government has to focus on
internal sources of income like, charging tax to those people who go
aboard for study or work, educational support tax to the owners and
students of private schools and colleges and in all kinds of economic
activities.
14. As education brings prosperity, growth and development in the economy
and life of the people, our education system should be oriented towards
producing productive citizen and our national plan and programs
required to reoriented towards creating labour market and opportunities
for employing educated people in the country for the support of national
economy.

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