Five Million Jobs: What Do They Cost And How Can They Be Created?
Today 3.6% of Ukraine’s able-bodied citizens have no permanent job. Another million (according to pessimistic estimates, about seven million) of our citizens are seeking jobs abroad. It should not be forgotten that eliminating unemployment was part of the president’s election program. Back in the “pre-Revolutionary” days he promised to create five million jobs. The question is when and how this promise will be fulfilled.
“This is a very complicated task,” says Viacheslav Kredysov, chairman of the New Formation National Association, “because it costs the state about $50,000 to create one job. But this applies to Central European countries, so in Ukraine the figure will be lower because we have a cheap workforce.”
The cost of one job depends primarily on the extent to which it is equipped with machinery. Economist Demyan Bohynia, who heads the Department of Labor Economics, Demography and Living Standards at the Ukrainian Institute of Economics, says that the cost of a job unconnected to any complicated technological process is an estimated UAH 200,000. If any sophisticated mechanisms are required, a job may be worth 200,000 dollars. It is difficult to arrive at an average figure but, in any case, it’s all a question of money.
According to Mr. Kredysov, a state that wants to create such a large number of jobs can go about this in two ways: borrow money from the West, i.e., attract foreign investments, or create conditions for the development of small-scale and medium businesses. To create these conditions, it is crucial to reform the law and taxation system, which are not business-friendly, according to Mr. Kredysov. “The tax administration has drawn up a tax code to suit itself, not the development of business,” the expert says. Another cause of unemployment is small businessmen’s doubts about stability. “If people see that the situation in this country is stable, they will invest in business, but if the situation is totally unpredictable they will be putting their money away ‘for a rainy day’.”
However, you can only invest or withhold money if you have some, and in this case the much-discussed labor migration is playing quite a positive role. Parliamentary Ombudsperson Nina Karpachova estimates that Ukrainians working abroad earn a total of more than two billion hryvnias a month, which far exceeds the average level of individual incomes in Ukraine. Moreover, the greater part of this amount returns to the workers’ homeland, thus reducing poverty in this country. Still, the extent to which this money can be invested in the Ukrainian economy depends on the stability of the domestic situation, the tax system, etc. In other words, it is impossible to eliminate unemployment without improving the tax and investment climate as a whole.
On the other hand, economist Ella Libanova thinks it’s not even worthwhile talking about creating five million jobs. It is far more urgent to ask whether it is worth doing in the first place. “This number worries me. Yes, we badly need jobs, but 200-300,000 new or substituted jobs a year will be quite enough.” As this expert explains, Ukrainians will simply not have enough money to buy the products made by such a large number of people. “I see no sectors in which these jobs can be created, at least not until wages have been raised,” Ms. Libanova says.
In contrast, Demyan Bohynia thinks that the five-million figure may be too small to solve the problem of unemployment, especially when the army is being reformed. In his opinion, new jobs should be created in the high-tech sector, construction, and agriculture. “In the past decade we’ve gone the liberal-conservative route: we said the state should not meddle in the market and as a result we got a bazaar, not a market. We must have the same situation that exists in the West: the state stands between labor and capital. The government should clearly define measures to regulate the labor market,” Mr. Bohynia says.
