The flood of Ukrainians leaving the country to look for work in the EU countries that began in 2014 has peaked and will stabilise or start to decrease in 2019, according to a report by the Centre for Eastern Studies (OSW) released in October.
Ukraine suffered from a catastrophic economic collapse with GDP contracting by 17% in the first quarter of 2015, but Ukrainians had already started to leave as the country descended into political chaos during the Euromaidan revolution a year earlier.
Incomes plummeted as a result of the shock caused by the violent change of government. The International Monetary Fund (IMF) recently called Ukraine the “poorest country in Europe” – behind even little Moldova – with a gross domestic product per capita in current prices in US dollar terms of $2,964 in 2018, according to October's update of the multinational lender’s World Economic Outlook. That puts Ukraine behind Moldova ($3,226), Belarus ($6,020) and Russia ($10,950).
At the same time Central and Eastern Europe (CEE) is booming and suffering from an acute labour shortage, with jobless rates across the region falling to record lows. The boom CEE has been enjoying for the last four years has reached its peak as countries in the region start to run up against their structural limits, but wages in Poland, a favourite destination for Ukraine’s Gastarbeiters, are still four times higher than at home.
The trickle turned into a flood after President Petro Poroshenko won a much-desired visa-free travel deal between Ukraine and the European Union (EU) in November 2016. The deal doesn't give Ukrainians the right to work in the EU, but countries like Poland, desperate to fill empty shop floor bench places, quickly put in place special work permit schemes that do grant limited right to work permissions. Millions of Ukrainians left their homeland, although typically most go for an average of three months to make some extra cash before they return home again.
Remittances to Ukraine soared. The National Bank of Ukraine (NBU) calculated that between 2015 and 2017 the expats sent home $7bn in 2015, $7.5bn in 2016 and $9.3bn in 2017. But it seems the growing remittances have now peaked and the Gastarbeiters are expected to send home around $9bn this year — more or less the same amount as last year.
“The increased wave of migration from Ukraine to Poland, which began in 2014 is slowly beginning to decelerate. This migration is still mainly temporary in nature, and it is difficult to assess to what extent it may become fully residential. Probably over the passage of time, the current circular migration model will stop attracting new people. However, Poland remains the main EU country in, which Ukrainians work, because of several competitive advantages: extensive migration networks, a liberal procedure for legalising residence and work (for short periods). In addition, despite the fact that the salaries migrants earn in Poland are small compared to countries in the west of the EU, the low living costs allow for regular and relatively high remittances to Ukraine,” Marta Jaroszewicz, an analyst with the Poland-based OSW, said in a report entitled “Migration from Ukraine to Poland: the trend stabilises” released in October.
Emigration is a problem for Ukraine, which badly needs to rebuild its own economy. With the brightest and hardest working members of the workforce overseas, that will hamper the economic recovery that has begun in Ukraine.
It is hard to say exactly how big an impact labour migration will have on Ukraine’s growth or to what extent it is already affecting growth, but the Ukrainian economy is already performing under par.
Sergei Nikolaychuk, the director of the NBU’s Department of Monetary Policy and Economic Analysis, said in February that work migration creates problems for the local labour market and is likely to influence GDP for the next few years. He believes that the drop in the workforce due to emigration led to a 5-8% loss in the number of employees in 2017. Previously the government projected a loss of 3-4%, so the correction is significant.
Coming out of such a deep depression in 2015 the bounce back should be significant — Russia’s economic growth hit 10% in 2000 following its own crisis in 1998 in a record that has yet to be beaten — but Ukraine’s growth in the last three years has been lacklustre.
Third quarter GDP growth in Ukraine actually slowed to 3.1% in annual terms, down from 3.8% in the second quarter, according to the NBU. And that was despite remittances arriving from workers abroad coming in at almost $1bn a month in the period, about 20% higher than the previous year’s levels.
Moreover, the economic outlook is deteriorating, although other factors are also to blame: global growth is slowing, caused in part by the international trade wars and closer to home a marked slowdown is expected in Europe, led by Germany, where economic growth is expected to stall completely this year.
The IMF downgraded its outlook for Ukrainian GDP growth in 2019-2020 in October, the fund said in its World Economic Outlook report, lowering its estimate for the growth in 2019 to 2.7% from 3.3% projected in April. In addition, the IMF worsened the forecast for GDP growth in 2020 to 3.4% from 4%, but improved this figure for 2018, to 3.5% from 3.2%.
While the money they send home is easy to measure, it is not entirely clear how many Ukrainians have left the country, but it is clear a lot of them have gone to Poland. According to the latest International Migration Outlook 2018, published annually by the OECD, in 2017 Poland became a global leader in the inflow of foreign, seasonal, short-term workforces, according to Jaroszewicz.
“This is unusual because Poland has never been a country of immigration, and indeed still remains a country of emigration,” she adds.
According to Poland’s Ministry of Family, Labour and Social Policy, the number of Ukrainian citizens who had obtained valid declarations of intent to employ a foreigner by December 31, 2017 reached 517,000 people, while another 208,000 Ukrainians had a work permit.
“To this number should be added the group of around 100,000 Ukrainian citizens who are permanently resident in Poland and do not need a work permit, or who are studying or living in Poland for reasons other than work. In total, this gives a number of around 900,000 migrants from Ukraine resident in Poland at the end of 2017. By the end of 2018, these numbers are likely to be lower due to the introduction of new rules for the employment of foreigners,” says Jaroszewicz. Other estimates put the total Ukrainian population in Poland at 2mn.
The move to Poland represents a marked break with the past, where Russia used to be the destination of choice. A legacy of the Soviet past means that all the members of the Commonwealth of Independent States (CIS) retain their visa-free right to travel, reside and work in Russia (although Ukraine has left the CIS as a result of its conflict with Russia).
Currently 4.4mn Ukrainians live in Russia, according to the Ministry of Foreign Affairs, but about one million of those are official refugees from the conflict in eastern Ukraine. In addition there are 1.2mn in Canada, 940,000 in the US, 500,000 in Brazil and 230,000 in Germany, according to the ministry.
And the number of Ukrainians moving to the other countries of Central Europe are likely to increase. Poland has been fast to welcome Ukrainian casual labour and make it easy for them to get jobs, but the other Central European states, which suffer from the same labour shortages, are close behind.
“Poland’s neighbouring countries have started to open up their labour markets to citizens of Ukraine to a limited degree; for example, the Czech Republic has increased its quotas for labour migrants, and Hungary has introduced an easier procedure for acquiring citizenship. Only in Germany do Ukrainians remain marginal among groups of foreign workers. No further rapid increase in migration from Ukraine is possible, due to the country’s dramatic demographic situation, the problems on local labour markets in western Ukraine, and the falling numbers of people of working age,” says Jaroszewicz.
Ukraine and Hungary got embroiled in a diplomatic row in October after it was discovered the Hungarian consulate in the western town of Berehove near the Hungarian border was issuing passports to the locals, many of whom are ethnic Hungarians. The consul was made persona non grata and expelled. However, granting Hungarian citizenship has not benefited Hungary as most of the Ukrainians that received the passports used the full right to residency and work to simply move to more prosperous EU member states.
The flood of workers into Poland will slow in 2018 as Poland has recently tightened the rules that allow temporary labour to work in the country. On January 1, 2018, significant legal changes covering the employment of foreigners in Poland came into force.
First of all, the category of work that can be performed on the basis of the “declaration of intention to employ a foreigner” has been narrowed. This currently covers all types of work that are not seasonal, and can be carried out by citizens of Eastern Partnership (EaP) countries for up to six months within a 12-month period.
There have also been changes to the system of granting declarations: a fee for their issue is now being charged, and the employer must provide notification that the employee to whom he or she issued the statement has actually taken up a job.
A new type of work permit, that covers seasonal work, has also been introduced, which entitles any foreigner to work for a period of no more than nine months per year.
“According to [Ministry of Labour] data for the first half of 2018, the number of declarations received by district labour offices was 820,000, although only about 756,000 were entered in the appropriate register. These covered about 687,000 foreigners (92% of whom are citizens of Ukraine). However, the number of people who actually took up work on the basis of the statements was smaller because, according to the verification system, in the case of about a third of the declarations issued and registered the foreigner had not taken up the position,” says Jaroszewicz.
While working out how many of these applications for permits to work actually translate into Ukrainians on a job in Poland is difficult, Jaroszewicz says that the numbers are clearly down by about a third, according to her estimates, from 948,000 Ukrainians employed in Poland in the first half of 2017 to about 600,000 for the same period this year.