Covid-19 in Morocco: Labor Market Impacts and Policy Responses
The Covid-19 in Morocco: Labor Market Impacts and Policy Responses report presents an analysis of the impact of the Covid-19 crisis on the Moroccan economy, focusing on labor markets.
The objective of the paper is to inform the Moroccan government’s pandemic response. The paper was prepared by the Morocco Employment Lab, a project led by the Jameel Poverty Action Lab (J-PAL) at the Massachusetts Institute of Technology, Evidence for Policy Design (EPoD) at the Harvard Kennedy School, and hosted at the Policy Center for the New South, a local Moroccan think-tank.
The pandemic has caused unprecedented socioeconomic disruptions worldwide, compelling governments to take strong action in order to mitigate the adverse effects of the crisis on firms and households. Morocco was no exception in this regard. The global demand slump has severely affected the country’s main trading partners, thus reducing a potential source of income; and health-related restrictions imposed to fight the pandemic exacerbated this trend.
As a result, the Moroccan economy is struggling today to keep the private sector afloat and preserve citizens’ livelihoods. But as the crisis persists and firms continue to suffer from economic distress, they are forced to downsize their workforce, thus triggering a downward spiral. It is crucial that effective action be taken promptly in order to preserve the efforts invested over the past years by the government to get people out of poverty.
Morocco’s quick, strict response to Covid-19 was relatively effective in limiting the spread of the virus. The strict lockdown proved to be important in containing the virus, especially given the fragility of the country’s health system characterized by low bed and physician capacity per person, and large inequities in access to medical services. But its upshot was a bleak economy struck at close range by severe supply and demand shocks, which are exacerbated by the interconnected nature of today’s economies. Compared to 2019, the second semester of 2020 featured grim export, employment and household consumption figures. A major feature of the current crisis is that populations previously disadvantaged in the workforce, such as informal workers, females, and youth, will likely face even harsher consequences, and preliminary evidence substantiates this. In the face of these events, the government filled the vacuum by financing social programs and relief packages for firms, at the expense of an ever-growing fiscal deficit due to the combination of declining tax revenues and additional spending. It remains that these measures have played a crucial role in helping households and firms weather the economic shock. First, cash transfers provided a much sought-after substitution revenue for workers. Second social and health insurance measures allowed workers from the formal sector to continue benefiting from essential services in pandemic times. Third, active labor market policies helped firms meet their financial obligations while also reducing the strain on workers. Fourth, the recovery plan introduced in early August 2020 contains specific measures targeting vulnerable sectors (e.g., tourism), the youth, and an ambitious social reform.
Yet, enforcing a set of measures does not equate to a way out of the crisis. At a time of high uncertainty surrounding the end of the crisis, the measures implemented in Morocco need to be thoroughly monitored and their impact carefully evaluated in order to ensure their effectiveness. At the same time, the international experience can shed light on much of the ongoing policy discussions in Morocco. From Peru to India, a reliable data architecture to target the disadvantaged has proved to be a winning strategy in pandemic times, a strategy that can be enhanced by using cash transfers and public works to support workers from the informal sector. Morocco can also leverage other countries’ experience in empowering women and strengthening their economic security, especially as they are likely to be particularly affected by the economic crisis. Lastly, Covid-19 has once again brought to the forefront the long-lasting issue of skill mismatch in Morocco: the way out will necessarily encompass identifying skill needs, retraining workers and incentivizing labor mobility.