There are fewer workers, more migrants, and this hinders economic recovery – NBU report
31 January 11:57
Disparities in the labor market, which are formed under the influence of migration abroad and mobilization processes, will persist in the near future, primarily due to the limited supply of qualified labor. This is stated in the NBU’s Inflation Report for January 2025, Komersant ukrainskyi reports.
According to the National Bank, the labor shortage will remain significant in the near future and will limit economic recovery. They state that the problem of labor shortages was exacerbated during 2024, but in the second half of the year, the number of job seekers increased slightly, as did the number of new resumes. Ukrainians were likely to return to job searching due to a further increase in wages. However, the effects of the war continued to limit the supply of labor, with the number of migrants abroad increasing by about 500,000 in 2024. Mobilization processes also had an impact.
Disparities in the labor market
Demand for labor remained high in early 2025, and a shortage of workers limited the ability to increase production and contributed to higher production costs. As a result, the burden per vacancy was even lower than in 2021, which contributed to the decline in unemployment over the past year.
However, the reduction in the unemployment rate is constrained by its significant structural component, which is caused by significant imbalances between the needs of employers and the knowledge and skills of potential employees. There is also a significant regional disparity in unemployment rates. This is due, in part, to the effects of the war: according to the NBU, unemployment is higher in regions close to the war zone.
Wages grew
The shortage of staff stimulated further growth in wages, which, according to the NBU, continued until the end of 2024, but gradually slowed. In the fourth quarter, real wage growth slowed to single digits due to both rising inflation and a smaller labor shortage, which remains significantly higher than before the full-scale invasion. However, as early as the third quarter of 2024, real wages exceeded pre-war levels in most economic activities.
What changes to expect
Driven by rising labor demand, unemployment will gradually decline, but will still remain higher than before the full-scale invasion. As economic conditions continue to normalize and demand for labor increases, imbalances will be determined by the slow return of migrants to Ukraine as they adapt to life abroad, Ukrainians leaving to reunite their families, and the resumption of labor migration.
The expected return of demobilized soldiers to civilian life will increase the supply of labor, but there may be additional challenges for the labor market in terms of increased regional and sectoral imbalances. Thus, the demand for skilled workers will remain elevated over the forecast horizon, which will drive further wage growth in the private sector. Against the backdrop of continued loose fiscal policy, this will also stimulate growth in consumer demand
Development of migration processes
In the event of an escalation of hostilities, there is a risk that negative migration trends will deepen and that labor shortages will grow further. At the same time, the rapid achievement of a just and lasting peace for Ukraine will encourage the return of Ukrainians from abroad.
In 2024, the outflow of migrants from Ukraine continued and totaled about half a million people over the year, which was in line with the NBU’s estimates. This gives reason not to change the assumptions about the future dynamics of migration. In 2025, the net outflow of external migrants is expected to continue (about 0.2 million people), while in 2026, the net return of migrants to Ukraine will begin (about 0.2 million people), accelerating in 2027 (about 0.5 million people).
A massive and rapid return of migrants under the status quo seems unlikely, which will result in a labor shortage over the forecast period. The slow return of migrants home will also limit the recovery in domestic demand. At the same time, changes in the policies of recipient countries toward Ukrainian migrants and the Ukrainian government’s proactive policy of returning migrants home may revive migration inflows.