Ukrainian migration: what our neighbors should expect?

Emigration has become one of the main tendencies and problems of Ukraine in recent times. This phenomenon has become a consequence of domestic difficulties in the country and a lack of faith in the improvement of economic prospects. In addition, Ukrainian migrants are also affecting the neighboring countries, which may lead to asymmetries in their labor markets and to other negative consequences. Therefore, it is necessary to assess the scale of migration of the Ukrainian workforce and the prospects for such a process, both for Ukraine and for the "hosting" countries. Situation analysis According to the latest information from the Ukrainian State Statistics Service, the number of migrant workers reached 1.303 million in 2015-2017. The share of labor migrants in the total population amount is 4.5%. Compared to the years 2010-2012, this indicator has increased by almost 10%. The main countries that "import" our labor force are Poland (38.9%), the Russian Federation (26.3%), Italy (11.3%), the Czech Republic (9.4%). In general, personnel with vocational education (33.9%) and complete secondary education (30.1%) are leaving Ukraine. Only 16.4% of migrants have complete higher education. 26.8% of the total amount of migrants worked according to the qualification; 29.5% worked in other field than the obtained qualification; 36.1% worked at a job that did not require qualification. It is seen that the percentage of low-skilled labor is rather high: the countries "filled" the niche of low-skilled labor with Ukrainian personnel: 41.6% of migrants are employed in the simplest professions. The percentage of employment in other professions is rather low (exception: skilled workers with tools - 25,9%). It should be noted that the Ukrainian State Statistics Service provides data based on a sample survey of the population (households) on labor migration and figures may differ from the actual ones. What are we facing? The increase of labor migration will have the following consequences: For Ukraine For hosting countries Negative consequences: Negative consequences: • labor market asymmetries, a change in the balance of highly skilled and low skilled personnel • "rising price" for the domestic labor market • importing the labor resources from abroad • additional expenses of the country for the education of new specialists • "aging" of the nation • lower production rates in the country • increased competition with the local population • higher probability of rising unemployment • conflicts, cross-cultural misunderstandings may appear • increased risks of illegal migration • local labor force begins to seek for job opportunities in other countries, asymmetries of the market arise Positive consequences: Positive consequences: • increase of money transfers from labor migrants • reduction of unemployment in the domestic market • part of the workforce returns with new knowledge and experience • the inflow of migrants fills unclaimed jobs • migrants do not need to be educated • "imported" labor force accelerates economic development • foreign workers reduce the average market wages • migrants stimulate consumer demand Under conditions of insufficient growth of production and the existence of unemployment, emigration does not create significant threats. Accordingly, the current shortage of personnel in Ukraine due to emigration is still subcritical: • Labor market is “overcrowded” due to insufficient growth of the Ukrainian economy (correspondingly, due to small supply of jobs). • A significant number of migrants are residents of the eastern regions, in particular from the territories of the ATO, to whom the Ukrainian market and state can not provide the necessary employment. • The share of emigrants who have left Ukraine permanently is covered by immigrants. In particular, according to the State Migration Service of Ukraine, 264,732 immigrants are registered by the end of 2017. • Despite the fact that the scale of migration is quite large (even according to the official data), it should be noted that it has a seasonal nature. The share of labor emigrants in the total population is less than 5%. According to the Ukrainian State Statistics Service, the share of migrant workers returning to Ukraine is 43.2%, the share of short-term migrant workers is 48.5% and emigrant workers is 8.3%. At the same time, although money transfers of migrants only partially cover the losses of our economy due to the outflow of labor force, in the current situation, the transfers of migrants even exceed foreign direct investments in dollar equivalent. According to the NBU, the volume of money transfers to Ukraine decreased by 4.4% in 2017, however it still amounted up to almost $2.378 billion. On the other hand, though basically low-skilled labor force leaves Ukraine seasonally, there is also a sufficient share of highly skilled emigrants. This situation worsens the asymmetry of the Ukrainian labor market and is really critical. Accordingly, the current threat to the Ukrainian economy is the outflow of highly skilled employees. In addition, continuation of the process of other kind of personnel leaving will also affect the country's economic security in long term. Even today, there is a shortage of employees in the sectors of Ukraine that are dynamically developing (where the largest number of vacancies is open and where it cannot be filled by appropriate personnel for a long time). Nowadays, Ukraine needs technicians, directors, managers, skilled workers with tool, personnel for equipment and machinery maintenance, operation and control. The largest number of opened vacancies is in the spheres of sales and trade, service, labor specialties and manufacturing. In turn, the outflow of younger generation, the aging of the nation, and the decrease in the number of economically active population (by almost 6%) are weakening the preconditions (resources) for the future rapid economic growth. At the same time, the Ukrainian economy needs to grow more dynamically, taking into account the chosen course of rapprochement with the EU countries. However, the economic gap is only increasing annually. Thus, it is difficult to break the vicious circle of "migration and the lack of economic prospects" and it will be even more difficult to do it in the future. Is there a way out? According to the Ukrainian State Statistics Service, about 40% of employees receive a minimum wage or near to it today (the minimum wage is formally received by 10% of full-time employees). In confirmation, about 46.2% of the total number of households in the country received subsidies for reimbursement of expenses for housing and communal services in 2017 - this is 10.3% more than in 2016. Accordingly, this is a characteristics of the employment situation in Ukraine. This is facilitated both by the personal qualities of individuals, that influence professional achievements, and the established "traditions" among the employers: non-fulfillment / absence of the norms of social corporate responsibility, the desire to save, underpay, earn quickly and the small share of the employee salary in the price of goods / services. Thus, besides basic, it becomes impossible to meet the other needs. Taking the above stated into account, higher wages, especially in the neighboring countries, stimulate the migration of Ukrainian labor resources. Moreover, foreign companies and countries are interested in attracting the external, especially highly skilled, personnel, because they do not spend money on their education. Meanwhile, there will be no major changes in the labor market and migration processes: all the tendencies will remain the same. The rates of personnel outflow from Ukraine will depend on economic (mainly on wages and purchasing power of hryvnia) and non-economic factors (social, cultural, security factors, etc.). The financial conditions of citizens, their needs, the policy of neighboring countries regarding the employment, etc. will be determinative. In other words, in Ukrainian realities, only economic stimulus is capable of keeping personnel on its territory. According to the NBU's commentary, labor migration will grow several years before wages rise to the required level. At the same time, it should be noted that the growth of nominal wages in Ukraine is significantly overtaking the real: its required level will be difficult to achieve in the near future. Given the growing number of Ukrainian migrants and the possibility of increasing the negative consequences not only for Ukraine but also for hosting countries, we should pay attention to the following: • The idea of ​​signing bilateral agreements on labor and migrants has a great potential, taking into account the diversification of opportunities and experience. In addition, it is likely to reduce the number of "uncontrolled" migration and, thus, countries will be "ready" for changes in the labor market and labor flows. • Under today's conditions, taking into account the main directions of Ukrainian budget expenditures, the labor market and its support remain without attention. Therefore, a clear strategy of the state is necessary, including the stimulation and support of economically active population, the creation of targeted programs for country development, business development, provision of specialists and education of the necessary personnel. • Focusing on products with greater added value, further ensuring economic growth and stimulating wage growth in line with economic growth, increasing the share of labor in product prices, further implementation of corporate social responsibility practices, providing white wages, social welfare packages, re-training, etc. In long term, stabilization of the situation and crisis-free development will allow young professionals and labor resources to feel confident in their country and its support that will slow down the outflow of personnel from Ukraine and prevent negative consequences for the neighboring countries. Unfortunately, at the moment there is no effective strategy and cooperation on labor migration. Instead, only the talks are being heard from the Ukrainian side and active preparations for the elections are taking place....

Yehor Kyian