Ukraine's talent drain: Assessing and overcoming personnel crisis

Today, 74% of companies in Ukraine are experiencing a shortage of staff, according to a study by the Talando recruitment agency. At the same time, the Ministry of Economy estimates that the country already lacks as many as 4.5 million workers to ensure sustainable GDP growth of 7% annually.

While the fact of the staffing crisis in Ukraine is quite obvious, the ways to overcome it are still under debate. In particular, the question of who should take the lead in combating the crisis—the government or businesses and the private sector—is being lively debated. This is compounded by the problems of education, which does not yet meet the needs of businesses for skilled workers, and the difficulties of returning Ukrainian citizens from abroad.

"A fully functioning economy is a key factor in our defense capability," Talando analysts write. "But there are no universal simple solutions, and there is a lack of personnel to implement complex strategies.

"Ukraine is on the way to stabilizing and restoring its economy, and the staffing crisis has become one of the key problems in this process," says Maria Abdulina, head of the Jobs category at classifieds company OLX. "Especially in circumstances where, against the backdrop of a general demographic crisis, businesses and the state are essentially competing for candidates, instead of jointly seeking solutions, minimizing the effects of this crisis and contributing to the recovery of the labor market."

The ministry tasked with returning Ukrainians

It would seem that the way out of the staffing crisis is to focus on the return of Ukrainians from abroad, since, according to the UN, there are about 6.5 million Ukrainian citizens abroad.

The Center for Economic Strategy gives a somewhat more restrained estimate – 4.9 million Ukrainians were outside Ukraine as of January 2024, but this number would be sufficient given the current market needs.

In August, President Volodymyr Zelenskyy announced the creation of the Ministry for Ukrainian Unity, an institution that will deal with the fate of Ukrainians abroad.

"Millions of our people in other countries, their ties and relations with Ukraine, the protection of our common interests as a nation – all this will be the responsibility of the new institution," Zelenskyy said at the time.

In September, David Arakhamia, head of the Servant of the People parliamentary faction, said that work was underway to find and discuss candidates who could head the new ministry. As hromadske has learned, many politicians and civil servants with extensive experience are interested in leading roles in the Ministry for Unity, and there is a real rush among the candidates.

However, according to a source in the Servant of the People faction, the sources of funding for the Ministry for Unity are still unclear, and this is why the process is moving rather slowly.

"The Ministry for Unity can be effective if international partners allocate funds for its work," says political analyst Petro Oleshchuk. "But the return of Ukrainians home depends on stability in society, on blackouts and aerial attacks – things that the ministry cannot influence.”

"However, such a ministry can at least resolve the issue of state employment programs or the creation of places of residence for those Ukrainians who have lost their homes and were forced to go abroad," adds the expert.

"The Ministry for Unity is a practical idea that has the right to exist and can become a prototype for the future Ministry of Migration and Diaspora," said Andriy Gaidutsky, PhD in Economics and migration policy expert. "It is to this ministry that the State Migration Service should be re-subordinated as a service institution.”

In his opinion, the Ministry for Unity should work with local authorities, as they should be the most interested in the return of potential participants in local labor markets. The second key area is the ministry's work with the National Bank and the banking system to ensure that not only people but also their money return to Ukraine.

After the war is over, 1.3 to 2.2 million citizens (36-61% of the total number of Ukrainian migrants and refugees) who are currently abroad will return to Ukraine, according to the Center for Economic Strategy. It all depends on the duration of the war, on the conditions under which it will end, and on the policies of Ukraine and the EU, explains Daria Mykhailyshyna, senior economist at the center.

She names several specific steps that will significantly encourage the return of citizens from abroad: rapid post-war reconstruction of the affected regions; simplified reintegration of children into Ukrainian schools; simplified entry of Ukrainian graduates of foreign schools into Ukrainian universities; cooperation with EU countries on the return of Ukrainians after the war.

"And also the development of public-private partnership mechanisms, when, for example, the state provides housing for employees and business provides jobs," says Mykhailyshyna. "This can encourage people from the occupied or destroyed regions who cannot return home to return to the country.”

First, according to Talando analysts, specific programs must be launched aimed at return migration and reintegration with the countries where there are currently the most Ukrainians. In Europe, these are Germany (1.2 million), Poland (960,000), the Czech Republic (350,000), the United Kingdom (245,000), and Spain (200,000).

In any case, it is beneficial for Ukraine to maintain constructive contacts with those who will remain abroad, whether for a certain period of time or forever. In particular, if they are students, doctoral students, or professors at foreign universities. For example, in September, during the visit of the Ukrainian delegation to the United States, First Lady Olena Zelenska presented the Global Coalition of Ukrainian Studies at Harvard to consolidate the scientific, cultural, and informational initiatives of Ukrainians abroad.

How the personnel crisis limits Ukrainian businesses

To better understand the range of possible solutions to Ukraine's human resources crisis, it is worth listening to the complaints in the labor market itself – both from employers and employees.

After returning from abroad, Bohdan Shpak started his own garment factory in mid-2022.

"My production facilities in Dnipro allow me to employ about 50 people. I currently employ 20. We are forced to abandon some projects due to a lack of staff," he says. "Seamstresses can earn 20,000-25,000 hryvnias ($486-607), but the profession is not popular as all young people want to work on computers. I think the bigger problem is that Ukraine does not popularize such light industry professions."

Today, 99% of Bohdan Shpak's garment production staff are women, mostly over the age of 45. Approximately 50% are IDPs from Kharkiv and Donetsk oblasts.

Tetiana Avramenko, who runs the Veranda on the Dnipro restaurant in Kyiv, faced a staff shortage back in May 2022, when the flow of people who wanted to visit the restaurant began to resume. Previously, men made up 80% of the staff, but in the spring of 2022, a significant number joined the Defense Forces or moved abroad.

"There are vacancies that are very difficult to fill. For example, for the Veranda summer terrace, which opened on May 17, 2024, we started looking for specialists a month before the opening, but we still cannot fill three vacancies for sushi chefs. There are very few such specialists left on the market. People come in saying they don't know what sushi is, but ask us to teach them. In this particular case, it's impossible, because you need to already have experience, because the processes at Veranda are very fast, and there is no time to train novices," says Avramenko.

Various business surveys show disappointing figures. 50.6% of companies operating in Ukraine lack production staff, drivers, and warehouse workers. 36.9% of employers have problems filling vacancies for craftsmen and production technologists. 28.8% faced the inability to fill office vacancies, according to the CID Center, Diia.Business portal and Advanter.

According to analysts at Talando, the number of vacancies in education and science increased by 27% in August compared to July. There is a shortage of people to work in the cultural sectors (23% monthly increase in the number of vacancies in August) and hotels and restaurants (+7%).

At the same time, 56.3% of Ukrainians who are currently looking for a job consider low salaries for the vacancies they are interested in to be the main problem, according to a study by the Razumkov Center think tank. According to OLX, the average salary in Ukraine is 19,000 hryvnias ($461) per month.

Hanna Vakhitova, a labor market researcher at the Kyiv School of Economics, believes that wages in Ukraine will grow.

"In the short term, the staffing crisis will lead to an increase in wages, because firms that can afford it will attract existing specialists and lure them from other firms," the economist says.

According to the OLX portal, the most scarce professions in Ukraine today are construction and infrastructure specialists, healthcare workers, industrial engineers, and technicians. 

"Infrastructure restoration is a priority for Ukraine, but the acute shortage of engineers, builders, road and housing restoration specialists complicates this process," says Maria Abdulina, head of the Jobs category on OLX. "Due to the outflow of personnel abroad and the growing demand for medical care in the country, there is an extremely significant shortage of doctors, nurses, and specialists in narrow medical specialties."

Due to the high demand for professionals, the outflow of personnel abroad or due to mobilization, there are more and more low-quality candidates on the market who do not meet professional criteria and often have an unsatisfactory set of soft skills, but try to mislead employers, Talando analysts say.

Regional distribution is an important factor for the potential recovery of the Ukrainian labor market. The slow recovery of the frontline regions or its complete absence pushes employers there to relocate, and employees to seek a better life in western Ukraine or Kyiv Oblast.

For example, in August 2024, the number of vacancies in Kharkiv Oblast was only 42% compared to February 2022, and in Zaporizhzhia Oblast—65%. At the same time, the job market in Lviv Oblast is 147% of the pre-war figure, in Ivano-Frankivsk Oblast—180%, and in Zakarpattya Oblast—205%, according to the Work.ua portal.

There is a personnel crisis. Is there a way out?

No matter how deep the Ukrainian staffing crisis is, there are still some solutions to overcome it. And there are quite a few of them.

First and foremost, these include working on the return of Ukrainians from abroad, employment of the unemployed, economic deferral for persons liable for military service, and attracting foreign migrants.

"Programs to attract foreigners to Ukraine are very urgent, because due to emigration and natural mortality alone the population of Ukraine may decrease by 600,000-700,000 in 2024," says Andriy Gaidutsky, migration policy expert. "The experience of EU countries proves that the only source of returning to the population growth trend is to attract foreigners, who, in particular, are ready to have more children than the average Ukrainian.”

Talando analysts point to some other important factors: the fight against ageism, attracting young people, people with disabilities, IDPs, war veterans, and women who for various reasons do not have full-time jobs.

For example, more than a thousand women have already applied for a pilot project to train truck drivers organized by the Ministry of Communities Development. The Ministry of Economy, in turn, has announced a program to train women to become excavator operators.

"These examples need to be highlighted for women who think: why not," says Hanna Vakhitova of the Kyiv School of Economics.

Maria Abdulina, a labor market trends specialist at OLX, points to some other solutions that cannot be ignored in the current environment: the development of infrastructure for remote work and fiscal incentives for businesses.

"The government can introduce tax incentives for companies that actively create jobs in priority sectors or offer training and internship programs," she says. "This will allow businesses to invest in new staff and adapt existing staff to new realities.”

Of course, the issue of education is also a pressing one, as many of Ukraine's unemployed need to upgrade or change their professional qualifications.

The Ministry of Economy has a program of training vouchers, where you can learn a new profession at public expense. The program includes 95 professions and 60 specialties. This year, 18,000 Ukrainians have taken advantage of the program.

In June, the governments of Ukraine and 50 partner countries announced the creation of the Skills Alliance initiative, which aims to raise 700 million euros to train or retrain 180,000 Ukrainian citizens over three years.

"According to the experience of European countries (in particular, Austria and Germany), the most effective format is joint training of specialists with the assistance of both the state and businesses," explains Maria Abdulina from OLX portal. "That is, when candidates can gain practical experience directly at enterprises and companies while studying, but the program is funded by the state.”

Hanna Vakhitova, a researcher at the Kyiv School of Economics, stresses the importance of such things as additional bonuses when attracting specialists to a company: insurance, the opportunity to visit the gym for free, and other perks. "Companies that have internal training programs can also lure people to join them," the expert adds.

The formation of effective antitrust legislation that will allow small and medium-sized businesses to fit into the supply chains of large businesses and cooperate on mutually beneficial terms will allow more businesses to scale and create new jobs, Talando notes.

At the same time, reorganizing labor legislation to include real tools to protect the interests of employees and entrepreneurs can neutralize speculative imposition of conditions on the part of employers.

"In general, synergy between the state and businesses is the key to solving the human resources crisis in Ukraine, especially in the context of reconstruction and adaptation to new challenges," concludes Maria Abdulina from OLX.