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Walaw

Economy

High Wages: An Asset for Workers, a Challenge for Businesses?

Tuesday 09 January 2024 - 09:15

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Morocco boasts the third-highest minimum wage among major EU garment suppliers, presenting both opportunities and challenges for the country's vital textile industry.

A recent study from the French think tank Evalliance suggests that Moroccan manufacturers may need to adapt pricing and production strategies to stay competitive globally while preserving profits. Navigating up the value chain could enable firms to absorb labor costs and tap into premium export markets.

At $307 per month, the minimum wage far exceeds pay in places like Bangladesh and Myanmar. While this puts tangible extra cash in workers' pockets, it also squeezes company bottom lines.

Mitigating factors, such as a robust GDP and currency valuation, help. However, as wage gaps with rivals widen, Moroccan firms could still lose contracts with price-sensitive EU customers.

According to Evalliance, the solution lies in innovation and specialization. Firms can achieve this by focusing more on design-driven, quick-turnaround, and high-quality products, enabling them to justify higher prices to Western clients. Worker skills development is key to this strategy.

Moving into more profitable medium and high-end market segments could offset higher labor inputs. This would allow Morocco to continue offering living wages while firms preserve margins amid fierce global competition.

Upgrading production and expanding export diversity will require policy and infrastructure support. However, in balancing textile industry success with national welfare, Morocco possesses advantages that many peers lack.