Remittance is making Nepalis lazy: Report

Kathmandu, January 15

Higher inflow of remittance has made Nepalis lazy, as people have cut down working hours, hitting labour supply and revenue of non-farm enterprises. These are the findings of a latest report prepared by the South Asia Watch on Trade, Economics and Environment (SAW- TEE), a think-tank.

The report, which dissected data of the Nepal Living Standards Survey 2010-11, has found that Nepalis, who receive money from family members working abroad, work 2.4 hours less per week on an average.

This reduction in labour supply indicates a jump in, what the report calls, ‘reservation wage’ — the lowest rate at which job-seekers accept a job. Since wage expectation of workers is higher than what the market is offering, beneficiaries of remittance are inclined towards working less as the money they receive from abroad is providing them with a cushion.

This has created a disincentive to work in general, says the working paper, ‘Remittances and Non-Farm Self-Employment among the Left-Behind: Evidence from Nepal’.

Nepalis received Rs 879.3 billion in remittances from the formal channel in the last fiscal year. This amount is 26.2 per cent as a share of gross domestic product. This has made remittance the biggest foreign currency earner for Nepal. A surge in remittance inflow has reduced poverty in Nepal, improved living standard and enhanced household spending. But as households’ financial health is getting better, the nation may be falling ill as people have started working less.

Economically active Nepalis, on an average, work 40 hours a week, which includes time spent on extended economic activities, such as household chores. The average working hours are the highest in salaried employment (42), followed by non-farm self-employment (39), farm self-employment (23) and extended economic activities (18).

But in households where remittance inflow has doubled, women’s working hours in non-farm self-employment has fallen by 3.6 hours a week on an average, says the SAW- TEE report. Higher inflow of remittances has also propelled women to work 1.6 hours less on an average per week in agricultural self-employment and 3.4 hours less in wage employment.

These women, who have cut down labour hours in core economic activities, are devoting more time to household chores, such as firewood collection and fetching water.

Despite this, their total working hours have not gone up, says the report.

This means extra time spent on household chores did not make up for reduced labour hours in core economic activities, such as agriculture and non-agriculture wage jobs, and farm and non-farm self-employment.

But it is not only women who are cutting down on working hours because of comfort provided by higher remittance inflow. Men are also making less contribution to core economic activities, says the report.

This, in turn, has hit the income of enterprises. Enterprises operated by households, that witnessed 10 per cent jump in remittances, reported 0.5 per cent decline in the gross revenue on an average, says the report.

This shows remittances, which were supposed to raise access to finance and ease credit or liquidity constraints, are not working as incentives for beneficiaries to expand business, thereby hitting the process of creating additional employment opportunities. This implies the gap in the labour market created by Nepalis, who have left for overseas job destinations, has not been fulfilled.

If this continues, Nepal may not be able to promote entrepreneurship to ramp up domestic production.

Most of the enterprises operated by beneficiaries of remittances are generally micro in nature with low returns and are operating in the informal sector. Perhaps, operators of these businesses were reluctant entrepreneurs, who were pursuing their vocation out of desperation, says the report. So, had there been adequate supply of salaried jobs, these entrepreneurs would have opted for salaried jobs over self-employment, adds the report.

But what is also true is that salaried jobs are scarce in Nepal and that is one of the main reasons why people, mostly men, are seeking employment opportunities abroad.

“This calls for policy attention towards promoting non-farm micro and small enterprises,” says the report, adding, “Policymakers should create conditions that make nonfarm self-employment a vocation of entrepreneurs who are enthusiastic rather than reluctant.”

“For this, we must raise people’s access to domestic market, expand transport network, focus on providing market intelligence, provide vocational training and appraise whether money remittance beneficiaries are getting from their family members abroad is adequate to start or expand a business,” said SAWTEE’s Research Director Paras Kharel, who is also an author of the report.