Interviewed by Oleh Ivantsov, The Day
Lawful business endeavors continue on a downward curve
Ukraine’s labor market is probably like any other such market anywhere in the world except that here it is complemented by the shadow sector, glaring discrepancies between official estimates and common sense evaluations, and the unpredictable consequences of over-regulation. The Day asked Oleksandr Yaremenko, Director of the Ukrainian Institute of Social Research, to explain what was happening with employment in this country.
Q: What are the specificities of today’s labor market in Ukraine?
A: In the first place, the government is getting to realize that the labor market is very specific, sophisticated, yet manageable. On the other hand, most of the populace seem to have grasped the idea that manpower is a commodity, as good as any, meaning that it is subject to market laws, has a price, and market demand. The current socioeconomic situation is crowding people out of this market. The number of job placements registered shows a sharp decline: 118,000 in 1995 and 74,000 last year. Domestic employers reported 130,000 vacancies in 1995 and 40,000 in 1997, even less in some sectors.
Q: How would you estimate current unemployment and its prospects?
A: In 1991, official unemployment rate was about 0.1 of the able-bodied residents of Ukraine. In the next three years it stayed at 0.3%; in 1995, it was 0.5%; in 1996, 1.56%; in 1997, 1.8%, and then 2.47% registered as of February 2, 1998. A 25-fold increment over the past seven years. In other words, there are 12 applicants for skilled jobs, 28 for office positions, and 49 for unskilled jobs. In other words, a skilled worker losing his job will have to vie for another one with fifteen contenders. At the same time we have different interpretations of the notion of unemployment. The International Labor Organization categorizes the unemployed as persons aged between 15 and 70 having no jobs and seeking ones or attempting to start a business of their own. The Ukrainian legislature added a “small” amendment to this characteristic, reading “... and persons registered with unemployment agencies as seeking for jobs.” Of course, official statistics are a far cry from reality. Our estimates (made in keeping with ILO s
tandards) point to 7% unemployment. Considering responses from people who thought they were jobless, the level is actually 9%. In other words, the real level of joblessness in Ukraine is 3-4 times over official statistics.
Unemployment structures could be described as follows. At the beginning it was mainly jobless women. At some periods such women made up some 80% of the unemployed. In 1997, this “inequality” became less marked: 60% female and 40% male unemployed. More than one-third of these were people under 28 years of age (reaching 45% at times). In terms of former occupation, the ratio of skilled workers increased, reaching 55%. The situation looks especially grim in small and medium-size urban areas. On the one hand, compared to the large cities, capital, private business, and moonlighting opportunities are very limited. On the other hand, such provincial labor markets are often linked to one or several enterprises providing for the entire local municipal network. Their closure or ineffective performance immediately sharpens the unemployment situation.
Everywhere in the civilized world small business is considered an effective unemployment remedy. This is evident if one compares Ukraine to, say, Poland: 200,000 small businesses in Ukraine and over a million in Poland. This brings to mind the USSR’s “cooperative movement” of the late 1980s when excellent opportunities were offered local entrepreneurs: 5% income and 7% wage bill tax. People doing business could lawfully build fortunes, offer job placements, and pay their taxes. In other words, we did have an experience in developing small business, short-lived though it was.
Q: What about the scope and main types of unofficial occupations in Ukraine?
A: Our estimates say that between 45% and 60% of the able-bodied populace are engaged in what we know as the “shadow sector,” on a permanent or seasonal basis. About a quarter of urban residents (let alone rural dwellers) are earning their living working what we call subsidiary plots (dachas, kitchen gardens, orchards, vineyards, etc.). Here such produce is the main source of income, and in 40% of cases the main source of food. Mind you, we have been registering such “shadow business” for the past several years and public opinion seems to take this for granted.
Q: Would you say that such “illegal economic endeavors” have become a mass phenomenon?
A: If we have 10% of such shadow business, it means we must combat it. If we know that this is being done by between half and two-thirds of able-bodied people (as evidenced by our studies carried out over several years), it means that we have bad laws lacking social and economic effect.
Q: What are the main types of such unofficial employment?
A: Let me tell you first about a certain curious trend. We read official accounts showing a reduction in the number of people employed. Our estimates point to the contrary. True, people’s temporary labor expenditures are growing. At present, the workweek per employee averages 40 hours. Add here an increasing number of people combining jobs or moonlighting. Approximately 45% of these earn more from moonlighting, which is especially true of people working for government-run enterprises or what we know as state-budget-sustained organizations. Our statistics state that two out of every five such employees have jobs on the side.
Q: How about personal survival strategies and business career plans?
A: Here is an example. Most young people living in Ukraine before 1992, aged up to 26, relied on their parents’ financial support. Now we have a numerically significant group (about 10-15%, according to our estimates) who are helping their parents. On the whole, the younger generation offers a sad picture on the labor market. We have data showing that about 30% of those aged between 17 and 28 are still unemployed and not enrolled in any institutions of learning.
Q: Is this official information?
A: No, we have results of our polls. This strata offers fertile grounds for alcoholism, drug trafficking, crime, and other socially hazardous phenomena. We have tried but been unable to prove a certain dependence; 1% unemployment growth causes a 4% rise in the crime rate. But we are sure that both these phenomena are interconnected, even if less manifest proportionally. Thus I am categorically opposed to reducing the time in school for our young people. Of course, education is allocated minor importance now that our economy is ailing, yet schooling expenses prove lower than those involved in sustaining state penitentiaries and financing measures to combat organized crime. In addition, Ukraine could stand to lose (and is actually losing) one if its few remaining advantages, inexpensive and highly skilled manpower. There is a dramatic brain-drain, our talented people and topnotch experts are being drawn into the shadow economy. Here production is kept in accordance with the technological and managerial standard
s of the developing countries. In a word, every such “individual survival strategy” does nothing to help to bring a European way of life any closer.
Photo by Oleksiy Stasenko, The Day
Labor is a commodity







