Contents include: basic data and social demographic indicators, 1971-95. Liberalizing the economy -- structural reform issues: reform of the fiscal system; public enterprise reform and increased scope for private sector activity; price liberalization and reform of consumer subsidies; environmental issues; financial sector; factor markets; and exchange system liberalization. Labor market developments; recent trends; structure of unemployment; reasons for unemployment; reforming labor markets. Determinants of nongovernment investment, 1972-95: nongovernment investment data; estimates of investment functions; explaining the performance of nongovernment investment. The associaiton agreement and the new fisheries agreement between Morocco and the EU. Statistical tables.


Contents include: basic data and social demographic indicators, 1971-95. Liberalizing the economy -- structural reform issues: reform of the fiscal system; public enterprise reform and increased scope for private sector activity; price liberalization and reform of consumer subsidies; environmental issues; financial sector; factor markets; and exchange system liberalization. Labor market developments; recent trends; structure of unemployment; reasons for unemployment; reforming labor markets. Determinants of nongovernment investment, 1972-95: nongovernment investment data; estimates of investment functions; explaining the performance of nongovernment investment. The associaiton agreement and the new fisheries agreement between Morocco and the EU. Statistical tables.

II. Labor Market Developments26

1. Recent trends in employment and unemployment27

Morocco’s population in 1995 was estimated at 26.6 million, with 48 percent of the total population less than 20 years old. Population growth has been steadily slowing in the last 20 years, to an estimated 2.06 percent during 1982-94. With an ongoing exodus from rural areas into cities, the urban population has been growing at 3.6 percent on average during 1982-94. Given these demographic trends, among the major challenges for Morocco’s medium-term economic policies are: (1) the provision of adequate basic education, health, infrastructure and housing services, in both rural and urban areas; and (2) the creation of sufficient employment opportunities to absorb the new labor market entrants and reduce existing unemployment, especially in urban areas.

Morocco’s total labor force (urban and rural) was estimated at 8.3 million in 1994, or 32 percent of the total population. Total labor force growth averaged 2.8 percent in 1982-94, as participation rates rose between 1982 and 1994 for both men (from 47.9 to 51.5 percent) and women (11.6 to 13.4 percent), with a more pronounced increase in urban areas, especially for women. However, the pace of employment creation in the last ten years was insufficient to absorb the new entrants in the labor force; total unemployment rose from 11 percent in 1982 to 16 percent in 1994; and urban unemployment reached 23 percent in 1995. In rural areas, unemployment is traditionally low, but underemployment widespread. Thus, in 1994 the earnings of one employed person needed to support about four people.

Data on the sectoral structure of employment indicate that in 1994 agriculture remained the largest employer, accounting for 40 percent of total employment, followed by industry/handicrafts and commerce for 14 percent each, and the government sector for 13 percent; other sectors accounted for much smaller shares of employment.

Among the employed, self-employment is substantial (22 percent of employed in the urban areas, and 34 percent in rural areas), which may in part reflect the lack of formal sector jobs; self-employment and family employment taken together account for 70 percent of employment in rural area. However, since nearly by definition the self-employed cannot become unemployed, the aggregate unemployment rate may reflect pressures on labor markets only imperfectly.

2. The structure of unemployment

Youth unemployment

The unemployment rate among the young is nearly twice the global rate, in line with the situation in many Mediterranean countries. For example, in 1994 about 31 percent of the labor force aged 20-24 were unemployed, while the likelihood of being unemployed fell rapidly with age; among the labor force aged 35 and older only 5 percent were unemployed. The high unemployment rates among the young raises obvious social and political concerns in part because of the weakness of the social safety net; at the same time, as the young are less likely to have to support a family, the overall social impact of youth unemployment may be less adverse than unemployment of individuals having families to support.

Unemployment and education

Urban unemployment data broken down by educational background28 indicate that unemployment rates do not decline with the amount of education received. Rather, the unemployment rate of individuals with a middle or higher education is highest (around 30 percent for most types of university graduates), and lowest among those with postgraduate education from the grandes écoles (11 percent) and those with no education (16 percent); this pattern is even more pronounced in rural areas. A more refined analysis (World Bank (1995)) indicates that unemployment is least likely for holders of a technical degree (Cadre moyen), reflecting a shortage of middle-rank management.

This pattern likely reflects that workers with secondary and primary school education will search for different kinds of jobs, and the latter may be more successful in finding the jobs of their choice Primary school degree holders are more likely to work within the informal sector as self- or home-employed, while those with a secondary school degree line up for the few formal sector jobs, notably in the government sector. Furthermore, a large share of graduates have degrees in the social sciences, and their job opportunities in the private sector are thus more limited. In response to the high unemployment among graduates, the government has been developing a special type of labor contract exempting firms hiring young graduates for 18 months from many obligations under the Labor Code.

Gender and unemployment

As indicated above, women’s labor force participation rate has tended to rise faster than men’s in recent years. In urban areas, male labor force participation actually declined from 76 percent in 1990-91 to 75 percent in 1995, while female participation rose from 24 to 31 percent.29 Over this period, in urban areas women also became relatively more successful in finding jobs—the unemployment rate among women stagnated, while it rose among men; unemployment among women remained nonetheless much higher than among men (32 percent for women compared to 19 percent for men in 1995).

3. Reasons for unemployment

The high unemployment in Morocco suggests that at the prevailing real wage labor demand falls short of the available supply, and implies the persistence of labor market distortions. These may also contribute to the existence of a large informal sector. In particular, restrictions on hiring and firing may keep wages above market-clearing levels; mismatch between supply and demand may arise because of inefficient intermediation, educational mismatch (the skills supplied do not match those demanded), or geographical mismatch (the labor supply not being available where it is needed).

Formal and informal labor markets

Data on the respective size of the formal and labor markets are difficult to establish. A rough gauge of the size of the formal market may be the proportion of workers registered in the national social security fund (CNSS) plus government employees in total urban employment (Chart 2). These data indicate that the “informal” sector, which accounted for about half of urban employment in the early 1980s, expanded its share to around 55 percent during 1985-93, but fell back to around 52 percent in recent years. While job protection legislation, minimum wage legislation, and sectoral wage agreements only cover the formal sector, they nonetheless affect the informal sector as well, if only because job market legislation and official wage bargaining will strongly influence the relative size of the formal and informal sectors. Thus, the relatively high “formal” sector wages during 1988-93 (as measured by the SMIG, the government wage, or the average wage of workers registered in the CNSS), and their decline in 1994-95, may explain part of the expansion and subsequent shrinking of the informal sector during these periods.

A large informal sector typically entails social costs such as losses in tax revenue, as tax evasion is higher in the informal sector, and lower overall productivity, as most informal activities take place within sectors of relatively low productivity (e.g., services), typically at subsistence wages. Lastly, policies emphasizing job security and high pay in the formal sector may raise overall unemployment by inducing workers to “line up” for them. For instance, while university graduates could find “insecure” employment in the private or informal sector, they may still prefer to wait for a “lifetime” job in the public sector.

Job protection regulation

Restrictions on firing, especially of permanent30 workers, which are intended to protect workers given the lack of unemployment insurance in Morocco, remain a major obstacle to a well functioning labor market in Morocco. Under the existing labor code, firing workers for noneconomic reasons has to follow strict procedures, especially regarding advance notification and the amount of indemnity.31 Individual firing for economic reasons (e.g., mismatch, technical change, etc.) is forbidden by law, and any such decision thus has to be authorized by the court; collective firing has to be approved by the regional authorities. Workers often go to court to seek reinstatement or higher severance pay, and courts often decided in favor of the workers. By raising exit costs, these features have made it harder for firms in need of restructuring to adjust. The rigidity in firing has affected hiring practices: firms either tend to hire temporary workers or to base their hiring decisions on personal contacts. More generally, employers are likely to have been cautious in hiring, given the high costs and risks associated with it. Employment creation may also have been slowed, because firms may have become less efficient, since they can not easily adjust the size of their work force to changing economic conditions.

Minimum wages and government wages

The government’s minimum wage and public sector wage policies have further contributed to the malfunctioning of the labor market. The legal minimum wages for nonagricultural workers (SMIG) and for agricultural workers (SMAG)32 apply to all employees, including seasonal and temporary ones, of at least 18 years of age.33 The minimum wage law seems to have been strictly enforced; it was seen by the authorities as a means to alleviate poverty and avert social tensions during the adjustment period. The minimum wages are, in principle, to be adjusted whenever the increase in the consumer price index exceeded five percent, but in practice have actually been adjusted in an irregular manner. In real terms, both minimum wages trended steadily upwards from 1987 until 1992, before declining somewhat, on average, during 1993-95.

The minimum wages may have directly affected employment by reducing incentives to hire, especially young or low-skilled workers, and indirectly by affecting the overall average wage. For example, as the SNUG (and similarly government wages) increased relative to formal sector wages, urban unemployment rose during 1987-95 (Charts 1 and 2), although the increase in employment was strongest in 1993-95 when the real SMIG stabilized; this probably reflected lags, as well as accelerated urban migration, notably after the 1992-93 droughts. Econometric work in a recent World Bank report also indicates that unemployment in urban areas and the gap between the average formal sector wage and the SNUG were negatively correlated over 1979-93.34 A smaller gap may have tended to induce the substitution of low-skill workers by high-productivity workers, thereby increasing unemployment. The SMIG has remained about 55 percent higher than the SMAG, which may have contributed to incentives for rural-urban migration.

Chart 1
Chart 1

Morocco Labor Market Developments, 1980-95

Citation: IMF Staff Country Reports 1997, 006; 10.5089/9781451824650.002.A002

1/ Wages deflated with CPI.2/ Minimum wage for non-agricultural sector.3/ Minimum wage for agricultural sector.4/ Average wage of workers registered under the National Social Security Fund (CNSS).5/ Real non-agricultural GDP/urban employment.
Chart 2
Chart 2

Morocco Labor Market Developments, 1980-95

(In millions)

Citation: IMF Staff Country Reports 1997, 006; 10.5089/9781451824650.002.A002

1/ Workers registered in the National Social Security Fund (CNSS).2/ Civil and military employees.

Developments in government wages reflected the fiscal policies pursued during 1980-93. After an increase in 1979 in response to the oil price shock and social unrest, wages were frozen as part of the fiscal retrenchment during 1980-85; as a result, government wages declined in real terms by 18 percent. During 1986-91, wage increases were granted to attract and retain qualified civil servants, and the average government real wage gradually returned to its 1980 level and somewhat beyond by 1991; however, they fell again during 1992-95, as there were no adjustments in the nominal wage during the 1992 and 1993 drought years, and only a modest adjustment in 1994. Nonetheless, the spread between the average government real wage and the average formal sector real wage (measured by the real wage of workers registered in the CNSS), which had narrowed during 1981-86, widened again between 1989-95.

The evolution of wages

The institutional setup of the labor market is likely to have contributed to upward pressures on wages, although empirical evidence is limited. Data on minimum wages, public sector wages, and average nongovernment “formal sector” wages provide some limited measure of union pressures35 (Chart 1). The minimum wage rose in real terms by 10.2 percent during 1990-94, while total labor productivity—as measured by the ratio of non-agricultural GDP to urban employment—stagnated; the real government wage was more closely aligned with productivity developments, and the real “formal” sector wage has been on a declining trend since 1989. The rapid rise in the real minimum wages is likely to have encouraged not only labor migration into the informal sector but also to have increased capital intensity in the formal nongovernment sector. In addition, with the growing wage premium in the government sector over the “formal” sector, the most talented job seekers will naturally prefer employment in the public sector; this further stifles the development of a productive formal private sector.


Educational mismatch is suggested by the high unemployment rates among high school graduates. High subsidization of higher education and a traditional high rate of absorption of graduates in the public sector may have contributed to the gap between the skill mix provided by the educational system and the skills demanded in the economy. Low levels of achievement in basic education may also have slowed development of a modern high-productivity formal private sector. Another source of mismatch could be inefficient job intermediation. To date, employers are not free to hire as they choose, and the government maintains a monopoly in the area of labor intermediation. Nonetheless, because government agencies offer only limited placement services (that mainly catered to unskilled labor), direct hiring by firms or hiring through private firms specialized in the placement of seasonal or temporary workers are tolerated. As a consequence, most hiring is conducted through personal contacts or advertisements in newspapers, and less than 5 percent of new hiring in urban labor force is handled by government agencies. Matching problems in a broader sense may also reflect insufficient labor mobility, as indicated by differences in regional unemployment rates (which varied between 17 and 31 percent in 1994). Housing shortage could be a main contributing factor to insufficient labor mobility.

4. Reforming labor markets

Fundamental labor market reforms are needed, particularly to promote employment in the formal nongovernment sector because of its higher productivity and focus on the production of tradable goods, and such reforms have to be an essential component of Morocco’s employment-generating high growth strategy. A reform agenda aimed at lowering unemployment and fostering employment in the formal sector in Morocco would need to include the following elements:

  • Reform of job protection legislation facilitating labor shedding, provided sufficient advance notice is given. The cost of labor shedding for employers should be reduced by streamlining firing procedures, and reducing uncertainty pertaining to severance regulations and judiciary recourse.

  • Use of the legal minimum wage limited to protecting the weaker segments in the population. A prudent minimum wage policy is all the more important as payroll taxes in the formal sector are substantial36; such taxes further exacerbate the shift of unskilled workers into the informal sector.

  • Consideration of a number of measures to reduce the high youth unemployment rate and foster employment of the young in the formal sector, for example through limiting the applicability of job protection and minimum wage legislation to older individuals.

  • Reforms in the educational system, to adjust the skill profile towards private sector needs. For example, to provide labor market entrants with more market-relevant, technical skills, formal apprenticeship schemes could be set up on a more comprehensive basis.

Table 1.

Labor Market Indicators, 1978–95

article image
Source: Fund staff estimates, based on data collected from annual urban labor market survey; bi–annual national labor surveys; and general population census (1982 and 1994); these data may not be fully comparable due to differences in coverage.

Measured by number of workers registered in the National Social Security Fund (CNSS).

In percent of urban labor force.

Minimum wage in nonagricultural sectors; end of period.

Deflated by CPI.

Minimum wage in agricultural sector, end of period.

Based on wage bill declared by workers registered in the CNSS.

Civil service and military; based on central government wage data.


Prepared by K. Enders, with contributions from V. C. Thai and P. Kunzel.


Data for this section are drawn from the comprehensive 1994 census and the more limited 1995 urban population and employment survey. Data in Table 1 and the charts include data from earlier surveys; as the various surveys differed in coverage, data may not be fully comparable. Minimum wage data represent end-of-the year observations.


Enquête nationale sur la population et l’emploi, 1995.


Enquête nationale sur la population et l’emploi, 1995.


In Moroccan law a permanent worker is defined as someone who works continuously for at least one year in a given firm.


The time period for advance notification depends on the seniority of the worker and the type of the firm. The indemnity mandated by law depends on the number of years of service, and varies from 4 weeks for the first five years of service to 38 weeks for 15 years of service. More specifically, the indemnity was equal to 48 hours per year for the first five years, 72 hours per year for 5-10 years, 96 hours per year for 10-15 years, and 120 hours per year for more than 15 years of service. The indemnity was also affected by the worker’s seniority, age, pension, and the nature of the employment. Actually paid indemnities appear to be higher (World Bank (1995)).


The minimum wage law instituted a minimum hourly wage in 1936. A national uniform minimum wage law was passed in 1971, and gender differentials were eliminated in 1975. Minimum wages are determined by the government to reflect changes in the cost of living index.


Under the legislation currently in force, the full SMIG is paid to workers of age 18 and older. Younger workers receive a fraction of the SMIG: 80 percent for age 17-18, 70 percent for 16-17, 60 percent for 15-16, and 50 percent for 14-15, plus a premium of 5-20 percent based on seniority. Employers are not required to pay minimum wages or related social contributions to apprentices.


See World Bank (1995), Vol. II, Annex A.


Morocco has several strong and well-organized trade unions, with close ties to major political parties.


According to World Bank report (1995), Vol. II, Annex III, social security contributions and other changes nonwage may add 20-35 percent to take-home pay.

Morocco: Selected Issues
Author: International Monetary Fund