Labor strikes in manufacturing and services sector have intensified in Nepal, especially after 2006. The strikes are usually organized by left-leaning trade unions, who get substantial backing from their affiliated political parties. Nepal probably has one of the forceful and unionized labor, at times displaying militant behavior, in South Asia. The repeated manufacturing and services sector strikes are based on demands for wage hikes, allowances, better facilities, etc. Minimum wages are reviewed every two years and fixed trilaterally (unions, employers and government). At the moment, manufacturing sector minimum wage in Nepal one of the highest in the region, but productivity growth has not kept pace with it, resulting in erosion of cost competitiveness. More on this here and here.
In this blog post, I wanted to share a simple chart that shows the disconnect between wage growth and productivity growth in the manufacturing sector. Especially between 2007 and 2012, while labor productivity (measured by value added per employee) increased at an annual rate of 11.4%, wages, salaries & other benefits per employee increased by 12.2%. The data comes from the latest census of manufacturing establishments.
Here is another chart showing the comparatively high minimum wage in Nepal relative to its per capita GDP and the regional economies. One of my friends (Brad) shared this chart.
Nepal’s manufacturing sector has been shrinking over the past several years. Its share of GDP declined to an estimated 5.6% in FY2014 from 8.2% of GDP in FY2002.