Reshaping the labor market:
What industries generate new jobs as overall employment is on the decline
Employment in Ukraine compared to pre-Maidan years
From early 2016, Ukraine’s economy has returned to growth that is slowly gaining pace. At the same time, the media buzz about intense labor migration to Ukraine’s EU neighbors. What is behind this trend? Is it caused by a sharp decline of employment after the Maidan, as the critics of “broken economic ties with traditional markets” lament, or other factors? Did employment in key industries start plummeting in 2014? How has the restoration of the economy in the past years affected employment in Ukraine’s economy overall and its individual sectors?
The first problem in attempts to figure out the employment situation in Ukraine is the relativity of statistics. Some of it is drawn by the State Statistics Bureau on the basis of assessments, not specific numbers. Probably the most accurate indicator of trends in Ukraine’s labor market is the data on changes of staff employed in the economy and by individual industries.
The overall number of staff employees in Ukraine went from 7.845mn in December 2015 to 7.630mn in December 2017. This was a 2.7% decline over two years. In Q1’2016, an economic revival began that still lasts today after the near collapse of 2014-2015.
This decline of employment statistics has come mostly from Donetsk and Luhansk oblasts which had 613,000 staff in December 2015 and 505,000 in December 2017. This loss came up after the official statistics dropped enterprises in the occupied territory that had been accounted for in it up until March 2017, as these businesses had formal registration in Ukraine.
Without Luhansk and Donetsk oblasts, the decline of staff over the two years of renewed economic growth was 107,000 people or 1.5%. This, too, is a general number as some industries lost jobs while others created new ones at a different pace.
A number of industries have generated new jobs over the past two years. In trade, the number of staff went 5.5% up, from 668,000 to 705,000 people, over 2015-2017. The staff of ground and pipeline transportation industries has increased by 7.7%, from 246,600 to 265,700 employees, even as several thousand jobs were lost in these industries in Luhansk and Donetsk oblasts after March 2017. Air transportation shows the best dynamics, even though the number of staff there is not too high, going up 23.5%, from 6,800 to 8,400 employees, over 2015-2017.
The industrial sector is not as gloomy as pro-Russian lobbyists complain as they lament about mass layoffs as a result of Ukraine’s association with the EU and broken economic ties with “traditional” markets. The processing industry did see a significant decline of jobs over the past two years, going down 3.6%, from 1.3 to 1.25mn people. But this came entirely from Donetsk and Luhansk oblasts where staff in this industry shrunk from 156,800 to 107,400 people. In the rest of Ukraine, employment in the processing industry has somewhat increased, even if only slightly.
Some sectors of the processing industry demonstrated better growth, from 12.3% in the pharmaceutical industry (from 21,100 to 23,700) and 7.3% in the light industry (from 72,200 to 77,500) to 3.6% in wood processing and printing (from 66,200 to 68,600). Employment in furniture manufacturing has gone up, although the State Statistics Bureau mixes it in with other sectors. As more foreign companies opened up in Ukraine by 2017, the increase of jobs in electric ware manufacturing exceeded the loss in the occupied territory, growing by 4.4% from 47,700 to 49,800 from December 2016 through December 2017. Transport engineering is slightly reviving employment with a growth of 1.6% from 136,200 to 138,400 jobs.
On the nationwide scale, employment plummeted by 34.8% (from 121,000 to 78,900) in coal mining, 16.8% (from 234,200 to 194,900) in steel manufacturing and processing, and 10.6% (from 61,200 to 54,700) in the chemical industry. In each of these cases, the decline occurred after the business located on the occupied territories was removed from official statistics. In Donetsk and Luhansk oblasts, for instance, the staff employed in the mining industry went from 95,000 to 58,700 over this period.
As a result of significant changes in the structure of employment, Ukrainians have lately shifted jobs between industries. The food industry is now employing far more people (280,000 staff) than steelworks or coal mining added together, or all engineering sectors other than electronics and electric ware manufacturing (252,200 jobs). Given the growing presence of foreign transnational corporations, electric ware industry has 49,800 jobs. It will thus soon catch up with the chemical industry with its 54,700 jobs.
Coal mining (78,900) is already behind employment in IT (127,000 based on assessments of industryfocused media) and is about to lag behind the light industry with 77,500 employees in December 2017. Wood processing may soon take over as it offers 68,600 jobs
The overall number of staff employees in Ukraine went from 7.845mn in December 2015 to 7.630mn in December 2017. This was a 2.7% decline over two years. In Q1’2016, an economic revival began that still lasts today after the near collapse of 2014-2015
now. Given the current dynamics, the IT sector may outpace metallurgy and steel processing put together in several years from now.
WAS IT BETTER OR WORSE BEFORE THE REVOLUTION?
One often hears a statement blaming the collapse of employment on the Maidan and the break-up of economic contacts with Russia as a “traditional market”. Crowds of jobless Ukrainians have moved to work in EU member-states, critics say. In fact, the staff in most industries had been shrinking faster in 2010-2013 than it has after the Maidan. And there was no sign of positive dynamics similar to that seen in most industries over the past two years.
The overall number of employees in 2010-2013, the years of economic growth, even if slow, went down by 5.6%, from 10.76mn to 10.6mn. Note that this statistics included Crimea and all of Donetsk and Luhansk oblasts. In 2016-2017, by contrast, the decline was 1.5% (Crimea, Donetsk and Luhansk oblasts were not included as the data from there is distorted by the unstable basis for comparison in the occupied territory). Employment in trade in agriculture produce went down by 15.5% from 2010-2013, followed by a 24.4% decline in construction and 8.1% in the processing industry. The only sectors where employment was growing during that period were the pharmaceutical industry (23.5%) and transport engineering (13%). Other processing industries saw a more or less rapid decline of staff, sometimes measured in double digits. The number of employees fell by 5.7% in food processing, 4.7% in wood and paper processing, 7.8% in electric ware and electronics manufacturing, 5.9% in other engineering sectors, 11.6% in metallurgy and metal processing, 12.8% in the chemical industry, 13.5% in the light industry, and 30.6% in coking and oil refining. The non-manufacturing sector wasn’t faring much better. Telecoms saw employment fall from 208,000 to 184,000 under the Party of Regions government, followed by the transport sector (276,000 to 272,000) and the hotel and restaurant business (109,000 to 108,000). The only exceptions were trade that grew 1% from 902,000 to 911,000 jobs and financial insurance with a 1.5% growth from 271,000 to 275,000.
IT’S ABOUT BETTER WAGES
The slowdown in the decline of employment over the past two years compared to the pre-war 2010-2013 period shows that Ukraine’s labor market was not exactly the key factor in the spike of labor migration of Ukrainians to the EU. The likelier motivations included the visa free travel regime and the higher loyalty of foreign governments to Ukrainian migrants. The latter is manifested, among others, in a sharp increase of quotas and licenses given to Ukrainians coming to work in EU member-states, especially Poland, Lithuania and Czechia.
Therefore, the growth of Ukrainian labor migration to the EU in the past couple of years can be blamed on easier access to the European labor market and higher salaries, not the decline in the number of jobs in Ukraine. Another factor is the shift of many labor migrants from the Russian market to the European ones. Still, there has been no sharp increase of labor migration to the more distant countries that used to be attractive destination for Ukrainian labor migrants, such as Italy, Spain and Portugal.
All this does not cancel out high unemployment in Ukraine, especially for young people and the countryside. However, the number of such jobless people has hardly increased over the past two-three years. Quite on the contrary, it stays unchanged or falls as the generations change and those born during the demographic gap of the late 1990s and early 2000s enter the labor market, while the outnumbering generation of the 1950s baby boomers leaves it. Meanwhile, the demand for employees from Ukrainian employers grows, even if the pace varies by industry, and many companies face more problems in finding the staff they need for the money they are willing to pay.
THE GROWTH OF UKRAINIAN LABOR MIGRATION TO THE EU IN THE PAST COUPLE OF YEARS CAN BE BLAMED ON EASIER ACCESS TO THE EUROPEAN LABOR MARKET AND HIGHER SALARIES, NOT THE DECLINE IN THE NUMBER OF JOBS IN UKRAINE.
ANOTHER FACTOR IS THE SHIFT OF MANY LABOR MIGRANTS FROM THE RUSSIAN MARKET TO THE EUROPEAN ONES