How much Ukraine loses from labor migration?

Author : Oleksiy Kushch

Source : 112 Ukraine

Speaking about the reasons for the current economic "infirmity," people tend to name anything they want, but not the labor migration
14:00, 4 September 2018

Speaking about the reasons for the current economic "infirmity," people tend to name anything they want, but not the labor migration. Although not all officials in our country suffer from a kind of episodic myopia. Thus, the National Bank of Ukraine (NBU) in its report calls strengthening of labor migration the key risk for the country’s future economic growth. According to the analysts, this factor is conspicuous like genitals on one’s forehead. If even external conditions for our export goods are favorable in the near future (international prices for metals, grain, ore), and inflow of external and domestic investments into the real sector would begin, the development would not be rapid. Even now, even the average start-ups in the sphere of industry and engineering in Ukraine are facing a colossal problem of shortage of personnel, especially in the technical and engineering segments. Sudden resuscitation of large-scale productions in the east and south of the country, as well as the entry of large Western corporations to Ukraine, are not real at all because of the total deficit of workers.

Related: 108 Ukrainians accused of illegal transport of migrants detained in Italy, - ombudswoman

But the central bank of Poland has called labor migration from Ukraine a key factor in the current high rates of Poland’s economic growth. It was thanks to the influx of fresh Ukrainian migrants that the current pro-government party in Warsaw even managed to take an unprecedented step to abolish the decision of the "predecessors" regarding raising the pension age for the Poles. This happened due to the fact that part of the Polish labor migrants, who left for the countries of Western Europe, was replaced by an influx of migrants from Ukraine.

Today the Poles are shooting shows about Ukrainian guest workers a la "Girls from Lviv" and some social videos, in one of which the Ukrainian housekeeper helps a local idler solve the math problem, recalling her higher education. Although, of course, not everything is so rosy, and the idea that without the Ukrainians the Polish economic miracle would never have taken place is paralleled with quite opposite thoughts.

Related: Two Ukrainians arrested in Italy for transport of Afghani migrants

Although our political elites do not worry about this kind of segregation. They are more busy counting the transfers that come to Ukraine from the "labor migrants." Last year, the NBU has counted $ 9 billion. With this money, native financial-industrial groups have deployed both residential construction and new shopping centers. Everyone wants to get at least a small slice from this big cake. Polish banks have launched whole marketing programs in the hope of working with this resource. According to the Polish media, citizens of Ukraine for the third consecutive year are becoming leaders in the purchase of housing among foreign buyers. In 2017, Ukrainians have purchased 70,000 square meters in Poland, which is 16% more than a year earlier. Total purchases of housing by foreigners in Poland amounted to 264 thousand square meters (an increase of 6%). Hence follows a simple conclusion: every fourth apartment in Poland, bought by foreigners, belongs to people from our country. Germans are in the second place, the third belongs to the British men. French and Belarusians have also entered the top five.

And what do our statistics say? According to various estimates, between 2 and 6 million people work abroad. The current government is shying away from the population census. The most objective data say about 2.7 million permanent migrant workers.

Related: Labor migration: Ukraine suffers from brain drain

In recent years, the number of the able-bodied population of Ukraine has decreased from 20.9 million (2010) to 17.85 million (2017), and the main reasons for this have been the annexation of Crimea and the occupation of part of Donbas.

Surprisingly, at the same time, the dynamics of the gross product per capita of the able-bodied population has practically not changed in the last seven years: in 2010 this indicator was 6.5 thousand dollars per year, in 2017 - 6.1 thousand dollars. The extremes were fixed in 2013 - 8.8 thousand dollars (maximum), which is explained by the policy of the fixed rate, when GDP grew, and the exchange rate remained unchanged, and in 2015 (minimum) in the amount of 5 thousand dollars (one of the reasons was the sharp devaluation of the national currency). These figures are taken without taking into account Crimea and uncontrolled territories of Donbas.

Related: Labor migration may be beneficial for Ukraine

If we take the dynamics of GDP in 2014-2015, the total decline in the gross product was 16.4%, while in 2009, due to the global world crisis, a comparable 15.1%.

Related: Labor migration from Ukraine increases: Should it be limited?

Data on per capita income clearly show that if the GDP growth in 2016-2017 could only gain about 5% of the 16.4% lost, GDP per capita in terms of per capita practically returned to the level of 2010 (the growth of this indicator in 2010-2013 largely due to the policy of a fixed rate). And this means that if the crisis of 2008 was internal (although it was introduced from the outside, exacerbated due to the inefficient internal structure of our economy), the crisis of 2014-2015 was provoked by external, exogenous causes (war, annexation), although the trigger was inside the national political system. Thus, everything the authorities should do was not the mythical "reforms", but a simple restoration of the decayed economic potential, effective economic incentives and a new employment policy that would stimulate income growth and slow labor migration.

Related: Labor force migration slows economic growth, increases price rates, - National Bank of Ukraine

At present, labor productivity in Ukraine is practically at the level of 2010, and if the scale of labor migration exceeds the estimated indicators, it exceeds this level. The remaining population generates the final national product at its maximum. The transition to a higher level is possible only because of colossal investments (innovative leap), which is practically unrealistic, or as a result of activation of the frozen potential of the real sector of the economy. Plus the development of the tertiary sector (services, science, education, medicine). But there is not enough population for this. Those 2.7 million people who went abroad could generate GDP at the level of $ 16.5 billion. Instead, the government consoles 9 billion transfers, which are not only almost half as much, but also practically do not participate even in minimal budget redistribution. In addition, the work of 2.7 million people is a wage fund in the amount of 11 billion USD per year with deductions to the Pension Fund in the amount of more than 2,5 billion USD and income tax of about 2,1 billion USD, which would allow to increase the revenue part of the budget, and reduce the deficit of the Pension Fund.

Related: Labor migrants transfer almost $ 10 billion a year to Ukraine

But these are just figures for our "fathers of Ukrainian democracy!" It is just nothing for them, but for us, it is our whole life. They have been “amortizing” the old potential of the industrial economy of the Ukrainian Soviet Republic for 25 years. The present migration-raw material model would handle much less. Although in the context of the current economic policy, the main thing is to survive until the next summer.

Related: 1.2 thousand illegal migrants in Ukraine

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This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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