POLICY BRIEF CHRONICLE OF RUSSIA'S WAR AGAINST UKRAINE: WHAT IS HAPPENING IN THE LABOR MARKET IN THE SME SECTOR

POLICY BRIEF

CHRONICLE OF RUSSIA'S WAR AGAINST UKRAINE:

WHAT IS HAPPENING IN THE LABOR MARKET

IN THE SME SECTOR

SUMMARY

 

The war started by Russia against Ukraine is causing massive losses. Ukraine's economy is taking blows, but holds on - despite the war. The events of 2022 have posed new challenges for business: some companies during the war faced supply chain disruption, lack of fuel or reduced demand, while others suffered from damage of property or forced to start a lengthy process of relocating production facilities. Millions of Ukrainians have lost their jobs, and the unemployment rate has reached 40%.

To assess the exact scale of losses in the field of employment in the small and medium business (SME) sector is still very difficult to estimate due to limited data and extremely uncertain, changing circumstances that affecting the situation in Ukraine. It is impossible to form a general objective and consistent picture and due to the fact that data from official and unofficial sources are often inconsistent with each other.

This document combines data from official sources: State Statistics Service of Ukraine (SSSU), the State Employment Service (SESU) and data of the largest online job search services and the results of sociological business surveys. Based on this approach we were able to identify general trends on the labor market in the SME sector and develop recommendations for its stabilization and overcoming the negative consequences.

Before the start of a full-scale military invasion of Russia, small and medium-sized businesses were the largest employer in Ukraine. It accounted for more than 75% of all employees in Ukraine, or 4.8 million Ukrainians. The remaining 25% (or 1.6 million Ukrainians) worked at large enterprises.

The most popular area of activity small and medium-sized businesses (SMEs) in Ukraine have been and remain wholesale and retail trade, repair of of motor vehicles. Further in different proportions for medium and small businesses are industry, logistics, agriculture and construction. An important feature for most small and medium business is a geographical reference to its consumer. This factor has become decisive in the conditions of war.

Since the beginning of the war, the labor market turned into an "employer's market". The number of hired workers and entrepreneurs who actually became unemployed is measured in millions. The imbalance between the demand and supply of labor in the central and western regions , where a significant number of internally displaced persons find a shelter has become an essential factor.

Negative consequences of the labor market crisis felt more by employees than employers. Companies optimize costs, reduce salaries and bonuses or even dismiss employees. Employers, in turn, have there is a greater choice of specialists for their vacancies.

Ukrainian and global labor market will no longer be the same as before. If before we were directly dependent on the external conjuncture, today it is the war in Ukraine is changing the previous paradigms and principles of both economy and the labor market.

Relocation and forced migration (internal and external) have led to changes in the very structure of the labor market. In combat zone regions the number of jobs has decreased, respectively there was an increase in competition in the labor market, increased risks for both business and for employees. The demand for labor force also decreased sharply due to inability to work in the conditions of hostilities actions, reduced demand for goods and services and uncertainty of the future. Damage, destruction, loss of production assets, infrastructure, supply chains have resulted in inability to fulfill the undertaken obligations, "disruptions" in logistics, "freezing" of entire regions of the Ukraine labor market and sectors of the economy.

Currently, the labor market is stabilizing, but still at a rather low level. Unemployment will remain high for a long time due to effects of the war and significant structural disproportions. As a result, Ukraine is still dominates the employer's market - the number of  vacancies, although increased compared to March-April, still remains two to three times (depending on the field of activity) less than it was before the full-scale aggression. Regional and sectoral disproportions remain.

Gradually, the market will recover at a faster pace. For how many years this will happen - is currently unknown. It all depends on whether there will be investments in Ukraine and what events await us in the near future.

 

You can find the full text of the document in Ukrainian at the link: http://scc.org.ua/content/hronika-viyni-rosiyi-proti-ukrayini-shcho-vidb...

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