NBU Inflation Report: What Changes Have Occurred in the Labor Market Since the Start of the Full-Blown Invasion

The recovery of the labor market in Ukraine after a full-scale invasion will depend on the return of migrants, the involvement of veterans in civilian life, and the increased participation of people with disabilities. The effective integration of these groups, with the assistance of the state and business through adaptation and retraining measures, is important to overcome the staff shortage and stimulate a rapid economic recovery, UNN reports, citing NBU data.

Details

Both in 2021 and 2023, the shortage of workers was particularly pronounced in male-dominated sectors such as construction, transportation, and mining. Businesses in these sectors attribute this shortage to mobilization and point to great difficulties due to the lack of highly skilled workers. They also point to the long time required to train new personnel and the growth of informal employment among men.

While mobilization has had an impact on the labor market since the full-scale invasion, migration has had a much greater impact. According to the NBU, in 2023, the labor force aged 15-70 decreased by more than a quarter compared to 2021, with external migrants accounting for almost half of this decline. Although 8-10% of migrants continued to work for Ukraine remotely, the main blow to the labor force was due to their attrition.

Demographic losses and the occupation played a significant role in the decline of the labor force in Ukraine in 2023, accounting for about 40% of the total decline compared to 2021. The decline in the labor force was also greatly influenced by the transition of a part of the population to an economically inactive state due to difficulties in finding work, especially among internally displaced persons, the need for family care, an increase in the number of pensioners, and a lack of necessary skills in the labor market. This was felt across the country, especially in regions with active hostilities. In addition, businesses have experienced other difficulties due to the war, such as psychological pressure on employees, interruptions in operations during air raids, and problems with energy supply.

Businesses reported increasing problems with labor productivity and a growing need for investment and innovation to improve it. Remuneration played an important role in hiring employees both in 2021 and 2023. However, while in 2021 businesses considered excessive salary requirements to be a reason for refusing to hire, by 2023, amid increased competition for staff, businesses were ready to raise salaries to retain staff. "Higher salaries in other sectors" was the key reason for raising salaries in 2023, despite financial difficulties.

"The shortage of personnel is forcing companies to attract groups of people who were previously less represented in the labor market. In particular, the hiring of women and people working remotely has increased, while the involvement of veterans and people with pre-war disabilities is still insignificant," the report says.

In the future, the return of migrants, the integration of veterans into civilian life, and the inclusion of people with disabilities in the labor force will be key resources for improving the labor market in Ukraine, especially during the country's rapid recovery. Effective inclusion of these groups will depend on the cooperation of business and the state, which should focus on developing integration measures, ensuring accessibility and adaptation of jobs, including remote work and retraining. Without these measures, the labor shortage will remain a serious obstacle to recovery.

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