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Why ordinary Ukrainians earn abroad, while political elites spend abroad?

Author : Oleksiy Kushch

Source : 112 Ukraine

$ 10.3 billion from labor migrants - is it good or not? It is in this vein that our politicians argue: pro-government and opposition.
23:23, 9 November 2021

Open source

Although, in my opinion, it is more correct to answer with the question: "What would happen if these people worked at home?"

History does not know the subjunctive mood, but if this is not history and not the future (in which case we would be dealing with futurism), if this is the present?

Can we guess in the "if only" style?

Moreover, recently the Nobel Prize in Economics was awarded to another trio of economists, and one of them, Guido Imbens, formulated causal conclusions for statistics, social sciences, and biomedical sciences.

Related: What's wrong with new payment for Ukrainian labor migrants?

Here's what one of his works says: "Most of the questions in the social and biomedical sciences are causal: what would happen to individuals or groups if part of their environment were changed? In this approach, causal relationships are comparisons of such potential outcomes. The fundamental problem with causal inference is that we can only observe one of the potential outcomes for a particular subject."

The work of Imbens and Angrist boils down to the so-called randomized controlled trial when participants in the experiment are divided into several groups, in one of which external intervention is assessed (for example, taking medications or a special diet or activity regimen), and in the other group, everything remains unchanged (or instead of drugs, "dummies" are taken - the placebo effect).

The aim of the study is to see how effective external intervention was in the experimental group compared to the control group.

Let's do the same research to assess labor transfers. In the first group, we have real Ukraine. According to National Bank estimates, the amount of money transfers from workers to Ukraine in January-September 2021 amounted to $ 10.34 billion (an increase of 19.7% compared to the same period last year). This amount is comparable to the exports for the first three-quarters of our key commodity items: cereals (9.1 billion), sunflower oil (5.2 billion), ferrous metals (11.5 billion), and ore (6.5 billion). Unfortunately, according to international standards for assessing gross national income (not to be confused with GDP), labor transfers from abroad are deducted from this indicator, reducing it. But this money ends up in the balance of payments and ensures the stability of the hryvnia. Large businesses and financial speculators have the opportunity to withdraw their capital from Ukraine at a comfortable rate. Here everything goes on a counter-course: 10 billion dollars come to Ukraine from labor migrants and in the same period 6-8 billion dollars are withdrawn by business from Ukraine.

The strengthening of the hryvnia exchange rate is the loss of hryvnia income by the families of labor migrants and the rise in the cost of residential real estate (where migrants mainly invest their savings). But for FIGs and financial speculators, these are positive exchange rate differences and, accordingly, additional earnings on the course when income is repatriated abroad. It's like a balance, more precisely, an asset and a liability of a country, where FIG and the financial lobby are an asset, and the population is a liability ...

Remember: while ordinary Ukrainians earn "there" and spend "here", political "elites" earn "here" and spend "there" ...

But let's take another Ukraine, ideal. As Zelensky would say, a dream country.

Today, one worker who pays taxes in Ukraine produces up to about $ 20,000 per capita gross product per year, which, in general, is not bad.

In simple words, to maintain the state, you have to work for yourself and for the "guy" who picks apples in Poland, but whose relatives also receive pensions, subsidies, benefits, like everyone else who deducts taxes to the Ukrainian, not Polish budget.

Related: Labor migrants send record amount of remittances to Ukraine in 2020

On the other hand, nobody can be blamed here: the state itself has created such a toxic environment that pushes people abroad to take a breath of fresh air.

Although the same 5 million Ukrainians, permanently or seasonally working abroad, could generate about $ 100 billion of GDP in their country, and instead transfer 10 billion to their homeland, that is, ten times less.

The additional 100 billion is given the indicator of the redistribution of GDP through taxes, plus $ 30 billion of budget revenues, which can be almost doubled.

These are capital investments in infrastructure, increased pensions and social standards, quality medicine, and education.

The problem of labor migration is not our "birthmark", it is a consequence of labor poverty, which is much more difficult to combat than social poverty because you cannot achieve success here by directly distributing money and benefits.

This will require a more complex task - creating a high-quality living environment. To paraphrase the national idea of ​​Israel, to be born, live happily, and die in their own land.

But to do this, the government must think about a simple line of causality:

  • increasing the level of added value in the national product;
  • increasing the level of wages up to 70-80% parity with countries - regional competitors;
  • creation of a sufficient number of highly paid jobs;
  • overcoming labor poverty in Ukraine;
  • stopping labor migration.
  • But the government is now busy with something else.

Related: Money transfers from Ukrainian labor migrants increase 25 times for 20 years

The current rent, raw materials, corruption model of the economy with a low level of gross added value and, accordingly, low wages is very beneficial for the political "elites" in power.

It is easy to operate and does not require tension. And, most importantly, it is easy to make money on it, removing raw materials and infrastructure rents.

Labor migrants in this paradigm, without knowing it themselves, only make it possible to postpone the inevitable finale, which will break out with the next crisis of world commodity markets.

The strategy aimed at stimulating labor migration (against the backdrop of an acute demographic crisis) resembles the behavior of a monkey under these conditions, which cannot pull its fist out of a trap box, because it feels sorry for the banana that it grabbed so tightly ...

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