Wage and Salary Index Growth: Are Nepali Workers Falling Behind?

The Salary and Wage Rate Index in Nepal offers critical insights into how workers’ earnings are evolving relative to inflation and overall economic growth. Over the past five years, the index has shown significant fluctuations. In FY 2020/21, growth was just 2.76%, reflecting the lingering slowdown from the pandemic. It jumped sharply to 9.09% in FY 2021/22 and 8.71% in FY 2022/23, driven by post-COVID labor market adjustments, increased demand in certain sectors, and rising inflationary pressures. However, this momentum has not been sustained: wage growth slowed to 3.56% in FY 2023/24 and further to just 2.63% in FY 2024/25, signaling stagnation in workers’ income growth.

When these wage trends are compared with inflation, the picture becomes more concerning. During periods of high inflation—such as FY 2021/22 (8.08%) and FY 2022/23 (7.44%)—wage growth barely kept pace, meaning workers’ real incomes did not increase significantly. In contrast, as inflation cooled to 2.20% in FY 2024/25, wage growth also weakened to 2.63%, suggesting that employees are not fully benefiting from price stability. Essentially, while households faced higher living costs during inflationary peaks, they are now seeing limited income growth even as prices stabilize.

This mismatch raises the question: are Nepali workers falling behind? The answer leans toward yes. Although nominal wages have increased in recent years, they have not consistently outpaced inflation, which means real purchasing power remains stagnant. The slowdown in wage index growth also points to structural weaknesses in the labor market—such as underemployment, dominance of low-productivity jobs, and limited industrial expansion—that prevent meaningful income gains for workers.

The implications are wide-ranging. Stagnant real wages constrain domestic demand, limit household savings, and reinforce dependence on remittances. For Nepal to ensure that workers are not left behind, policies must focus on creating higher-productivity jobs, strengthening labor rights, and linking wage growth more closely to economic performance and productivity gains. Without such reforms, wage stagnation risks widening inequality and undermining the benefits of macroeconomic stability.