# _Labor market distortions_

Distortions in the labor market and rigid regulations have also combined to constrain job creation (especially for women and youth) and generate high and persistent unemployment. High hiring and firing costs are an important impediment in that regard, whereas inadequate access to information hampers the efficient functioning and adjustment of the job market, most notably by constraining job search and making it costlier. Compared to neighboring countries, or countries at the same level of income, Morocco has one of the highest ratios of minimum to average wages, which has an adverse impact on formal sector employment and competitiveness in labor‐intensive industries. Other sources of distortions in the labor market in Morocco include the quality (or lack thereof) of cooperation between employers and unions (which play a significant role in wage formation and labor practices), frictions in the functioning of the legal framework for resolving labor disputes; and low impact of government programs, such as the National Agency for the Promotion of Employment and Skills (ANAPEC), to help young people find work. Another distortion is skill mismatches, as discussed next. According to the World Economic Forum's 2018 Global Competitiveness Index, Morocco was ranked only 119, out of 140 countries, for labor market efficiency, as well as 91 for redundancy costs, 102 for the taxation of labor, and 103 for hiring and firing practices.

# _Education System and the Quality of Human Capital_

Weaknesses in Morocco’s education system have also contributed to low job creation, low quality of the workforce, and high unemployment. According to the World Economic Forum (2018), Morocco is ranked 95 out of 140 countries in terms of its pupil‐to‐teacher ratio in primary education – a common indicator of the quality of basic education. At about 70 percent, the gross enrollment rate in secondary education in Morocco is one of the lowest in MENA. Dropout rates are also among the highest; 72 percent of students leave the education system without qualification. Among labor market participants, the average number of years of schooling is only five. Forty‐one percent of the workforce (and 46 percent in urban areas) has no qualifications, compared to 17 percent in Tunisia, and 6 percent in Jordan (World Bank, 2010). Moroccan students do not perform well in international tests. Literacy rates in rural areas are particularly low, especially among women. The majority of Moroccan students follow studies in social sciences at the expense of technical careers, which leads to skills mismatches, that is, an over‐supply of university graduates with generic education but not necessarily the skills that are demanded by firms.<sup>13</sup> Indeed, universities in Morocco tend to produce graduates mostly in humanities and social sciences (Figure 2.11), which makes them less equipped to secure formal sector jobs. At the same time, there is a shortage of students with more technical, scientific and professional backgrounds, that is, those with Science‐ Technology‐Engineering and Mathematics degrees (or STEM, as opposed to non‐STEM).<sup>14</sup> The

> 13 Pereira da Silva (2018) provides econometric evidence that the skill mismatch in the labor market – as measured by the ratio between technical and general university degrees produced by the education system –plays a significant role in explaining Morocco's high and persistent skilled unemployment.

> 14 More specifically, STEM refers to the following curriculum categories: Sciences, Sciences and Technology, Medicine and Pharmacy, Dental Medicine, Engineering, Technology. Non‐STEM refers to the following curriculum categories: Original Studies, Law, Social Sciences, and Economics, Humanities, Literature, Business Management, Science of Education, and Translation.

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