The Moorish Wanderer

Labour Market Engineering

Very short post about the peculiarities of Moroccan labour market: the active population has never been so low: the latest figures from HCP show a declining trend with fewer than 50% of the total population made up of the active population. Since fertility rates have been going down for quite a while, it means many potentially active individuals prefer (or are made) to stay out of the labour market: students with longer academic curricula, stay-at-home housewives, retirees and ultimately the unemployed.

I was looking at the data and comparing it to my own models because there is a frightening story to tell here. Demographics in Morocco tend to be similar in many aspects to the ageing societies of Western Europe, with a falling youthful population (individuals aged 17 and less have reached their absolute peak in 1994) whereas the elderly are increasing their numbers substantially – 24% of the population by 2050 according to HCP projections. In essence, the present demographics allow at best for a total workforce of 4.5 Million individuals, less than 14.4% of the total population.

Elederly population is expected to make up 1/5 of the population by the mid-century, with no active population to match.

Elderly population is expected to make up 1/5 of the population by the mid-century, with no active population to match.

And there is an even smaller fraction of these: women make up for almost half of the 15-59 population, yet their occupation rate does not rise above 30%. I mean, the 70% are supposed to be dutiful housewives, yet they do not procreate enough. The traditional family model has collapsed a long time ago. Thanks to structural changes in gender-based division of labour as well as harsh economic realities, there are coexisting benchmarks for women to choose from. Yet even if the mainstream outcome remains that of stay-at-home mum, fertility has not follow suit. Perhaps it is time to switch gears and go for massive arrivals on the labour market, let these women leave their homes to earn a living too.
In absolute and relative terms, Moroccan families will procreate less and less: in 2039, there will be less than a Million newborns, and the young Moroccans (14 and less) by 2050 will make up less than 17% of the total population. I would argue the only viable pro-traditional (or even nuclear) family discourse is a higher fertility rate. Clearly it is not the case, so in order to improve our immediate and medium term economic position, there is a need of flooding the labour market with all these women, some educated, others not so much, but at least total productivity would increase.

Some predictions about this: as a general rule, structural shocks (changes in the economy that are not due to physical capital stock) tend to have a positive impact on wages, especially skilled labour wages, and only a marginal effect on total hours worked; the latter is due to the very inflexible Moroccan labour market: every 1% ‘positive shock’ increases wages immediately by an annual 6.1%, and generates a net annual social benefit of 2.3%. These massive arrivals on the labour market are likely to increase unemployment dramatically, but there is a need of increasing rapidly female occupation rates, or growth will be structurally sluggish in the next decades.

Makassib: The Government’s Record?

Posted in Dismal Economics, Flash News, Moroccan Politics & Economics, Moroccanology, Morocco, Read & Heard by Zouhair ABH on September 12, 2011

A couple of days ago, was activated on-line to publicize the government’s achievements over the last 4 years. A PR campaign supposedly designed to give a flattering record of what the government did for the Moroccan people during their tenure. It’s new, it’s colourful, and… sometimes economical with the truth, to say the least. Larbi opened the charge with a gambit on the half-truths over unemployment. I’d follow with something that has attracted my attention over inflation, real wages and minimum wage.

According to the website:

الرفع من الحد الأدنى للأجر في القطاع الخاص ب 25% (من 1936,74 درهم إلى 2337,84 درهم)؛

The minimum wage actually increased a little above 20% by the website’s own figures, so the remaining 5% are funny money, a 2012 projection in fact, for which the incumbent government cannot claim credit, since it is on its way out shortly. This increase translates the government’s effort in sustaining dialogue with unions and their willingness to improve minimum wage even though it supposedly put a strain on public finances or on the domestic economy. This caring government wants to show that their policy aimed at reducing wage and income inequality was successful by acting in favour of the bottom 10% households.

3.27% real increase between 2008-2011 compared to 5.2% between 2005-2007

But then again, the real data shows these very same households did not improve their standards of living in the proportions this PR campaign tries to put forward as the precise improvement of income. As a matter of fact, the government’s claim a 20% increase in minimum wage actually redistributed further growth gains is contradicted by official statistics: minimum wage recipients have improved their real income but its evolution has fallen short of overall GNI growth, which means in dynamic terms that their real income and real relative income decreased over time. So much for social-liberalism on behalf of Istiqlal and RNI economic team…

First off, the above-quoted simplistic statement fails to take into account inflation-adjusted minimum wage and even more so, a specific computed inflation for the lower income-earner households: indeed, nationwide inflation fails to take into account the more sensitive price-elasticity these consumers display when it comes to basic goods. Indeed, a higher average propensity to consume edible goods can lead to at least one-point additional inflation on the annual synthetic index. In these conditions, trumpeting that nominal minimum wage increased 20% (or 25%) is meaningless until it has been re-computed on real basis.

According to HCP figures, nationwide inflation increased some 6% between early 2008 and mid-2011.  This means that the 3-years real (and effective) increase in minimum wage was closer to 13%, or 3.27% annual real increase.

When the composite index is computed on the basis of a larger coefficient put on edibles (48.3% instead of 41.5%) the actual inflation poorer households need to take into account is 6% instead, and that means  actual improvement in real wages is closer to 12%, i.e. a 2.87% annual improvement, hardly a makssab to speak of, especially when these are compared to the higher rates of compensation minimum-wage recipients enjoyed during the late 1990s, some 5.23% annual increase, in real terms. As such, the ‘effort’ the government supposedly put to secure higher minimum wage level did not make up for the 2005-2007 freeze.

Real minimum wage decreased compared to GNI per Capita, even though nominal terms marginally improved in 2010

When compared with recorded GDP and GNI growth rates over the period, minimum wage has fallen behind. In economic terms, the argument goes any indexation mechanism might trigger inflationary pressures, something this government, Bank Al Maghrib and the IMF cannot contemplate.

But then again, that bombastic figure, the 25% announcement, tries to slip in the idea that minimum wage actually increased at a higher pace, which it did not all the way over the considered 3 years. True, nominal minimum wage caught up with GNI growth in 2010, a commendable figure- the government should have highlighted it instead of indulging in shabby deceptions. But then again, we are reasoning in nominal terms: when we look closely at real variables, it is obvious that yet again, standards of living have definitely not improved: 2010 was a bad year for real GNI per capita, but was even worse of minimum wage, with respectively 4.11% and 0.99% year-to-year.

Let us now indulge in some gleeful partisan comparison: the MASI Dividend index (computed as the daily difference between MASI gross and net return indices) shows some 35.27% increase in 2010, compared to 2.47% in nominal terms. Well, these are good news for hard-working poor households, to know that stock exchange tycoons have increased their profits 1.3 over one year when they have benefited from a marginal 2.47%.

Caring government.