The minimum wage will be increased by 5% next month following social dialogue. Another increase of 5% will take place in September 2023. These revaluations will grant purchasing power to households who have to deal with high inflation. However, the increase in the minimum wage does not only have positive effects. It is likely to penalize private investment and employment, especially for young people.
Faced with far too vigorous inflation, wage demands are also getting stronger. Economically, the evolution of remuneration must reflect that of productivity and inflation. But, in reality, it is often the culmination of negotiations whose results, often out of step with the fundamental determinants, are, among other things, determined by the balance of power.
After a contraction of almost 5% in 2020, apparent labor productivity in the non-agricultural sectors recovered by 4.2%. Wages, on the other hand, have followed different trajectories. In the private sector, they rose by 3.2% in 2020, despite the pandemic shock, before falling by 1.2% in nominal terms and 2.5% in real terms last year. On the other hand, wages increased by 1.8% and 0.4%, respectively, in the civil service.
5% increase in September 2022
In response to the high cost of living, a 5% revaluation of the SMIG and the SMAG will take place next September. A second increase of 5% is scheduled for September 2023. The minimum wage in the public service will increase from 3,000 DH to 3,500 DH. If these revaluations make it possible to grant purchasing power to households, the effects on the economy are not only positive. Taking into account the adjustments made between 1999 and 2019, the gain in purchasing power linked to a 5% increase in the SMIG leads to a 0.2% increase in consumption, according to the results of a study by economists from Bank Al Maghrib.
That said, for companies, the rise in wage costs is only partially absorbed by productivity gains, which leads to a contraction in investment in proportions similar to the reaction of consumption.
In addition, “a 5% increase in the nominal SMIG leads to a cumulative increase of 1.24% in the real non-agricultural wage following five quarters and an increase in national unemployment of less than 0.1%”, note the authors of the study.
The effects on youth unemployment are more pronounced. This is explained by the low qualification of young Moroccans and their lack of experience, which reduces their ability to boost their productivity following an increase in the minimum wage. For decision-makers, the real challenge is to define the appropriate minimum wage threshold. In addition, they should consider other complementary levers such as the quality of social benefits granted to employees, tax incentives and the business climate enjoyed by employers.
Franck Fagnon / ECO Inspirations
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