Analysis of the impact of wage subsidies in Morocco: A mixed‐methods approach with employers and young beneficiaries

Motivation In developing countries, high youth unemployment and the mismatch between skills and labour market demand pose significant policy challenges. Active labour market policies can be broadly divided into supply‐side interventions, such as training, and demand‐side incentives, such as wage subsidies. Purpose This study evaluates the impact of Morocco's Idmaj programme, a large‐scale wage‐subsidy initiative. The central research question is twofold: what is the causal impact of Idmaj on employment outcomes and job quality, and how do these impacts vary across key demographic and regional strata? Approach and methods Using propensity score matching, we leverage a unique dataset covering over 3,000 beneficiaries, non‐beneficiaries, and employers, integrating these quantitative findings with a descriptive analysis of employer and beneficiary perceptions. Findings Our results reveal a positive and significant overall impact, increasing the probability of employment for beneficiaries by 10.3% compared to a matched control group. The programme also improves the quality of work, particularly by improving access to social security. However, these average effects mask significant heterogeneity. The programme's impact is strongest for graduates of vocational training programmes, who experience a 21% increase in employment probability, while effects for university graduates are not statistically significant, pointing to a potential risk of skill mismatch. Impacts are also moderated by gender, age, and region. From an employers' perspective, the subsidy induced 23.8% of firms to increase hiring, though evidence of opportunism exists, with 31.4% recruiting earlier than planned. Beneficiaries, while acknowledging skill gains, expressed strong concerns about inadequate monitoring and a mismatch between their profiles and job placements. Policy implications These findings call for significant programme adjustments, including better targeting by diploma type and age group, stronger institutional monitoring, and improved matching between beneficiary profiles and job placements.