7% Unemployment Rate in 2012: Mission Impossible!

To reach its goal by 2012, the government is counting on average growth of 6% and 250,000 jobs per year. But 400,000 job seekers are expected each year until 2014.

The positive trend in unemployment statistics over the past two years has been reflected in the intentions of the new government. In his statement to Parliament on October 24, Prime Minister Abbas Al Fassi set a goal of reducing unemployment to 7% by the end of the legislature, that is, in 2012. To do this, he is counting on average annual growth of 6%, and the net creation of 250,000 jobs per year, or 1.2 million additional jobs in five years, compared to an average of 200,000 per year currently. Is this goal, which is close to full employment, achievable?

Many doubt it. "For me, bringing unemployment down to 7% is not a goal, it's simply a challenge," says economist Driss Benali. "If it is relatively easier to create jobs in a protected economy," he explains, "this is no longer the case in an open economy like Morocco's. Businesses face competition, and they will face more and more; they are therefore condemned to be competitive. And competitiveness today no longer relies, as in the past, on cheap labor." The main employment problem lies precisely here: human capital; in both quantitative and qualitative terms.

First, quantitatively. Morocco is currently experiencing an advanced demographic transition phase that will last until 2024, with a peak in 2014. This phase is characterized by a relative decrease in the dependency ratio (ratio between the population under 15 and over 60, to the working-age population between 15 and 60); and therefore a significant increase in the working-age population. The mathematical consequence is an additional demand on the labor market estimated at an average of 400,000 jobs per year, double the level of jobs (200,000) created each year since 1995, according to the report on human development prepared on the occasion of the fiftieth anniversary of Morocco's independence.

Unskilled Labor
To this demographic variable, we must add another, socio-cultural: as society increasingly frees itself from the cultural constraints in which it was confined, the female activity rate will increase. This is additional pressure on the labor market. But that's not all: with the changes that agriculture is expected to undergo (by next April, the results of a study on the reconfiguration of this sector should be known), a large part of the workforce employed there will be released. Undoubtedly, it will flock to the cities in search of work.

This is for the quantitative aspect. Qualitatively, the employment problem is also ill-suited to government calculations. It should be noted that today, 90% of the employed active population consists of what the High Commission for Planning (HCP) calls "unskilled labor," i.e., unqualified. Moreover, if Morocco's exports are in the situation we know, that is, progressing weakly to the point that they only cover 47% of imports, it is precisely because exported products have a much higher labor content than technology. The government's entire problem - particularly this one, because it coincides with the strong period of the demographic transition - is to find the right formula that reconciles two imperatives: ensuring that exports have a much higher technological content (therefore more added value) in order to gain new market share, and at the same time, preventing this policy from resulting in infinitely greater job losses.

Unemployment could reach 16% in 2015
In a study entitled "Economic Growth and Human Development, Elements for Strategic Planning: 2007-2015," the HCP draws attention to this point. Among the growth scenarios it explores over this period, the one of "priority economic efficiency," that is, the scenario that prioritizes the implementation of "major, liberal reforms, in line with greater integration into the global economy," seems to be the one that would favor high growth (6.5% per year) but, it warns, at the cost of strong tensions in the labor market. Why? Because, explain the HCP analysts, "this growth, although high, would have a low employment content since it would be the result of capitalistic activities relying on a skilled workforce." Net job creation in this scenario would even be slightly below the average of 200,000 per year observed in recent years. With the expected developments on the quantitative level, mentioned above (demographic transition, increase in the female activity rate and rural exodus), unemployment would increase sharply. The HCP also predicts, in this scenario, that the unemployment rate would exceed 16% in 2015 (compared to 9.9% in the third quarter of 2007).

But can this government's strategy be identified with this scenario to conclude that it is impossible (or almost) to bring the unemployment rate down to 7% in 2012? Difficult to say; even if, in the opinion of some, we should not rely too much on the Emergence Plan, as seems to be the case, in terms of job creation. "This Plan targets high value-added activities, which is certainly an excellent thing, but let's not forget that only highly qualified profiles will be able to benefit from it," analyzes an economist. The large mass of workers, this economist continues, risks being marginalized because they are unqualified. This raises the issue of education-training, one of the key factors in Morocco's economic growth, and more generally, its development.

One thing seems certain: even with the scenario that seems best suited to the country's reality, that of managed openness, of a "balanced approach to economic and social development issues, including education, health and safety nets," even in this case, unemployment would remain high, at least initially. It would only fall below 10% around 2015, according to the most optimistic scenario.

Thus, the Al Fassi government's 7% objective looks very much like a wish. Certainly, one could retort, over the past 5 years (see curve on the previous page) the unemployment rate has fallen from 11.3% to 9.9%, a decrease of 1.4 points; and further points could be gained simply by boosting growth. A somewhat simplistic vision, because even assuming that the employed active population is essentially made up of qualified people, progress is made in fractions of points when approaching theoretical full employment. Moreover, and some believe it necessary (see Larabi Jaïdi's column on the next page), if the method of calculating unemployment were to integrate notions such as underemployment, unsuitable work, etc., an unemployment rate of 10% in 5 years would become an ambitious objective.

March 5, 2006

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