Senior Ukrainian and Western officials are meeting this week in Switzerland to discuss the country’s reconstruction. The Ukraine Recovery Conference in Lugano aims to bring government and business together to discuss the investments and reforms needed to support them.
Russia’s war against Ukraine has not only left thousands dead and displaced, it has also presented an extreme challenge to Ukraine’s economic well-being. And it is the workers who bear the cost.
While Ukrainian employers face the destruction of property and infrastructure, more than 80% of workplace fatalities have been caused by the Russian military. One person dies every day at work in Ukraine – including railway workers, medical staff and other public sector workers – according to official data.
Ukraine is expected to lose around 50% of its GDP this year due to the Russian invasion. Hundreds of businesses were destroyed and as a result 30% of jobs were lost. According to the Financial Times, by the end of the year, the unemployment rate in Ukraine will be 25%, a record in Europe.
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Until now, Ukrainian employers have had carte blanche to face the challenges of the Russian invasion. State agencies have relaxed their surveillance of the labor market. And reformers in parliament and government have sought to push through sweeping labor reforms that would disenfranchise Ukrainian workers.
But as millions try to figure out how to survive Ukraine’s economic downturn, another question looms on the horizon: what will happen when the war ends?
The future balance of economic power and prosperity in the country will likely be determined by the changes currently taking place in Ukraine.
The coming demographic shift
As expected, Russia’s war reduced labor costs in Ukraine. In May, wages fell by an average of 10% compared to the pre-war period. Salaries for vacancies in areas such as raw material extraction, security and manual labor have almost halved.
There is a growing impression that the negative effects of the labor market crisis are felt more by workers than by employers. The Ukrainians were ready to endure any hardship in the aftermath of the Russian invasion. But as the tide of war has changed, not everyone thinks the current situation – where companies have advantages over workers – is fair.
This advantage was reflected in the decision of the Ukrainian government to repeal considerable parts of Ukrainian labor legislation for Ukrainian employers. More importantly, employers can suspend employment contracts: in these cases, employees do not receive a salary, but are still considered employees. As of April 1, 2022, around five million citizens applied for one-time loss of earnings benefits – but by the end of May the number of registered unemployed was 308,000, or 16 times less.