Diagnosing the barriers to good jobs
A dynamic and inclusive labor market has been an elusive goal for Morocco. Although per capita income doubled between 2000 and 2018, and the poverty rate fell to one-third of its 2000 level, job creation has not kept up over the past decade. Furthermore, the labor market is now facing the shock of the COVID-19 pandemic.
A new World Bank report, “Morocco’s Jobs Landscape,” provides a fresh, up-to-date picture of labor market trends and priorities for the future. The study represents the first stage of a partnership with Morocco’s planning agency, HCP (Haut Commissariat au Plan), focusing on diagnosing the country’s employment challenges. This is now being followed by an in-depth analysis and assessment of concrete policy options to address these challenges.
The report details many positive developments in the labor market over the past decade. But it also uses various data sources to document the slowing pace of job creation which is not keeping up with population growth, the shortage of high-quality jobs in high-productivity industries, and the exclusion of many Moroccans, especially women and youth, from the labor market.
While concerns about the labor market have often centered on the persistently high unemployment, the report draws attention to another important problem – the 55% of adults who are not in the labor force in the first place. Morocco’s rate of labor force participation is low even by the standards of the Middle East and North Africa (MENA) region, which has the lowest participation rates internationally.
“Inactivity has long been a serious issue, even if it has not received the attention it should receive. This impacts the well-being of individuals and their families and limits the country’s economic development. The high levels of inactivity among young people is particularly worrying since their early experiences in the labor market are important for their prospects and indeed for the country,” said Jesko Hentschel, World Bank Maghreb Country Director.
The analysis highlights four priorities for enhancing job creation and the quality of jobs and for broadening participation in the workforce.
1. Improving the transition of young people into the labor market
Today, about 30 percent of 15 to 24-year-olds are neither working nor investing in their future by building their skills. These young people are known as “NEETs”—Not in Education, Employment or Training. The NEET phenomenon is a source of concern, repeatedly highlighted in King Mohammed VI’s public addresses. The detailed analysis in the report identifies level of education, gender, family background, and where youth live, as key factors associated with NEET status.
However, concerns about youth employment go beyond the NEET problem. Young people with high levels of education are not faring well either. They experience high levels of unemployment, leading to their demotivation and long-term economic inactivity, which not only affects their sense of personal fulfillment but also their contribution – present and future -- to the economy.
2. Broadening participation options for women
Less than 30% of women are in the labor force, and Morocco is one of the few countries in the MENA region where female participation rates are declining. There are important differences between urban and rural areas. Women in Morocco’s cities have especially high levels of inactivity – over 80% are not in the labor force. While female participation is somewhat higher in rural areas, it has been declining more. Almost all women in rural areas are employed informally, often in family farms and related activities. There are few alternatives available. In urban areas, participation of women is closely tied to education and family status. Although women working in the cities tend to be relatively well educated, the majority (55%) are employed in informal jobs.
Even though the number of working age women has increased in the last two decades, there were over 200,000 more women working in 2009 than in 2019. The factors explaining these trends are complicated, but the low level of female participation has important implications for the agency and economic autonomy of women and for the country’s economic potential.
3. Creating more good jobs
Formalization is one aspect of the labor market where progress has been made. There were 600,000 more wage-earners in the formal sector in 2019 than there had been in 2010. Yet, almost three out of five wage employees are still in the informal sector and when the self-employed and family workers are included, the overall extent of informality becomes much larger.
However, it is important to recognize that informality has many faces. It includes workers in profitable firms which should be formal but operate in clandestine situations to avoid taxes and social security contributions. In these firms, working conditions are often bad and at times dangerous, as dramatically underscored in the recent Tangier factory accident. But informality also includes millions of households who earn their living through rural agricultural labor, self-employment, or as employees in micro- and small enterprises where productivity is often too low to be able to become formal.
This does not mean, though, that such jobs cannot lift people out of poverty and become, over time, an important link into society, and the beginning of a ladder for better quality jobs later on. However, because they are outside the formal sector, almost all these workers and their families suffer from inadequate access to health services, retirement income, and insurance against loss of income. While bringing more people into the social security regime would be desirable, an alternative strategy would be to provide social and health protection independently from the employment status. Countries in Latin America have advanced in this route by designing social policies geared toward helping the working poor while reducing potential distortions in the labor market.
Economic growth by itself will not result in significantly greater opportunities for formal work. At least in part, Morocco’s informality reflects the structure of its economy and low productivity in some sectors. So, in addition to improving incentives for formal economic activity which might have some impact, broader policies that improve productivity and livelihoods within the informal sector would be a key building block for broader economic and social development.
4. Translating productivity growth into more good jobs
Morocco has succeeded in promoting some high value-added industries, particularly in the country’s major urban areas. While this has led to the localized creation of some good jobs, for the most part, spillovers to other sectors and other areas of the country have been limited.
International experience has shown that a key to sustained job creation is structural transformation with workers moving from lower-productivity to higher-productivity activities. This can include the expansion of the industrial sector or, increasingly, high value-added services. A few regions have undergone this sort of transformation: in Casablanca, for example, the manufacturing sector experienced a rapid increase in capital-intensive and high value-added activities, while in Tangier, different sectors have emerged to make more balanced contributions to productivity growth.
However, nationally, such structural transformations have been limited. Since 2010, almost two-thirds of the country’s productivity growth has been due to gains within sectors, while only one-third has been the result of the reallocation of productive inputs between sectors. When compared to other countries at similar levels of national income, Morocco’s slow pace of structural change stands out. Further work is needed at the micro level to better understand the distribution and characteristics of establishments and their contribution to productivity growth.
Meeting each of these challenges will be key to improving employment prospects in Morocco. This calls for multi-layered policies that bring in the perspectives and tools of different sectors. Job strategies also need to consider regional differences, as well as cultural and social factors.The next stage of the “Morocco’s Jobs Landscape” project will examine concrete policy options to address the factors constraining job creation and widespread participation in the workforce.