Nepalis See Life-Cycle Surplus Only Between Ages 27 and 46: Report

Labour income exceeded consumption among Nepalis aged 27–46 in fiscal year 2021/22, resulting in a life-cycle surplus, according to the “National Transfer Accounts of Nepal, 2021/22” report published by the National Statistics Office (NSO) on Friday, January 9.

The report presents National Transfer Account estimates for fiscal year 2021/22 using both per capita and aggregate measures. For analysis, the population is divided into three broad age groups: children and youth (0–24 years), working-age population (25–64 years), and older population (65 years and above).

“In Fiscal Year 2021/22, the life-cycle deficit is lowest among the 25–64 age group, although this group does not appear to generate sufficient savings,” the report said. “The highest per capita life-cycle deficit is observed among individuals aged 65 years and above, while the largest aggregate deficit is found in the 0–24 age group.”

Per capita consumption was highest among the 25–64 age group and lowest among those aged 0–24.

An analysis of age-specific consumption and labour income shows that from birth to age 26, consumption exceeds labour income, creating a life-cycle deficit. After age 47, consumption again surpasses labour income, resulting in a renewed deficit.

“Overall, individuals in Nepal experience an average life-cycle surplus for only about 20 years of their lifetime, with deficits prevailing during the remaining years,” the report says. “These deficits must therefore be financed through asset reallocation or private and public transfers.”

The report helps explain income and expenditure patterns across different stages of life. Finance Minister Rameshore Khanal said the findings were critical for effective implementation of social security programmes, industrial policy, economic planning, and employment generation initiatives.

Kamal Prasad Pokhrel, Chief Statistician at the NSO, said the report is the first of its kind in Nepal. He added that it examines how income, consumption, savings, and resource transfers vary across age groups.

A separate analysis of public and private consumption in the National Transfer Accounts estimates shows that per capita private consumption was significantly higher than public consumption.

“In the health sector, per capita public consumption exceeds private consumption by 902 units, and across all age groups, government health consumption is higher than private health consumption,” the report adds. “However, in the education sector, per capita public consumption is substantially lower than private consumption, indicating the need to strengthen public efforts in human capital development.”

According to the report, per capita total labour income in fiscal year 2021/22 stood at approximately Rs 87,814. Of this, around 69 percent came from wages and salaries, while about 31 percent was generated through self-employment. The share of wage and salary income was highest at 71 percent among the 25–64 age group and lowest at 35 percent among those aged 65 years and above.

The report notes a substantial gap between consumption and labour income. “Since total labor income is lower than total consumption, a large life-cycle deficit of NPR 1,527,219 million is observed,” it said.

The 11.4 percent unemployment rate reported by the Nepal Labour Force Survey 2017/18 reinforces the finding that unemployment has widened the gap between consumption and labour income.

“Inadequate employment opportunities, low wages, and limited income from self-employment have constrained labor income from meeting basic consumption needs,” the report added.

Although 65 percent of Nepal’s population falls within the working-age group, the report says the country has failed to fully capitalise on this demographic dividend.

“The labor force participation rate stands at only 38.5 percent, while youth unemployment is 12.7 percent,” the report adds. “These conditions highlight the urgent need to expand skills development and employment creation programs.”

The report calls for increased public investment in education, noting that Nepal’s labour force is expected to begin declining after the next 23 years. It stresses the need for additional policies to ensure retirement security, manage rising health costs, and strengthen social protection for older persons.

It also recommends expanding youth-focused vocational training and entrepreneurship programmes, alongside strengthening pension systems and health support for the elderly.

“Increased investment in education and health will contribute to human capital development, while tax policy reforms and savings promotion are necessary for the effective management of social security systems,” the report says.

It further highlights skills mismatches and large-scale youth migration for foreign employment as key structural challenges.

“Despite the large share of the working-age population, limited employment opportunities and skills mismatches have increased youth unemployment,” the report said. “Moreover, a significant proportion of the working-age population is engaged in foreign employment, limiting the expansion of domestic economic activities.”

It also notes inadequate technological adoption and persistent inequalities in access to education.

The NSO also released the “Small Area Estimation of Poverty, 2023” report, the first such study conducted after the implementation of federalism, on Friday. It is expected to support federal, provincial, and local governments in designing poverty-targeted programmes.