Ukrainian economic migrants caught in the COVID-19 trap

It is estimated that in total up to 2 million people may have returned to Ukraine. Many of them are now unable to go back to work abroad due to the actions of the Ukrainian government.

The authorities in Ukraine like to emphasise that Poland’s GDP is increasing thanks to Ukrainian economic migrants, but as it turns out, Ukraine’s economy is benefiting to a much greater extent. The Ukrainian economist Oleg Pendzin estimates that the inflow of funds sent back home by the migrants increases the retail trade turnover by 12 per cent and has contributed to an additional 3 per cent to Ukraine’s GDP. This means that without the remittances sent home by the migrants the rate of growth of Ukraine’s GDP would be negative.

COVID-19 is affecting Ukraine’s budget

In the years 2008-2019, the Ukrainian economic migrants transferred back home up to the USD94bn. However, that golden age is now a thing of the past. “The incomes of Ukrainian labor migrants will decrease due to the recession”, argues the Ukrainian central bank NBU.

The previous economic crises in Ukraine were cushioned with the inflows of funds from labor migrants. However, the current crisis involves not only economic disruptions, but also additional factors such as border closures and a drastic reduction in labor migrations. According to the NBU’s estimates, 10 per cent of Ukrainians returned to their homeland due to the pandemic, while a further 10 per cent were not able to go to work abroad. In total, the number of migrant workers sending remittances to their families back home decreased by a fifth. As a result, the NBU has updated its previous forecasts and now predicts that this year the total amount of remittances will reach the USD10bn instead of the originally expected the USD12.5bn. The overall financial effect could be even greater, however, because the incomes of those workers who did go to work abroad will decrease as a result of the crisis.

By the end of April 2020, the World Bank announced its own estimates concerning global remittances. In 2019, Ukrainian migrant workers transferred as much as the USD15.8bn to their homeland. This amount is 25 per cent higher than the estimates presented by the NBU and corresponds to as much as 10.5 per cent of Ukraine’s GDP. Ukraine is the European leader in this respect. The World Bank estimates that this year the overall value of remittances from migrant workers from Europe and Central Asia, including those from Ukraine, will decrease by 27.5 per cent.

Cancelled charter flights

In late April 2020, in an interview with the news agency RBK-Ukraina, the Ukrainian prime minister Denys Shmyhal pointed out that Ukrainian migrant workers were highly skilled and that they gained valuable experience while working in Europe. Mr. Shmyhal indicated that “as a result, they could significantly contribute to the development of Ukraine’s economy, and the authorities should try to keep them in the country.” After this statement, the government bodies almost immediately started implementing various administrative measures aimed at limiting the international movement of Ukrainian workers.

At the same time the Ukrainian administration blocked a number of charter flights that were supposed to carry seasonal workers to numerous destinations, including Finland and London. The flights were cancelled without any official reason when the passengers were already waiting for departure at the airport. Meanwhile, the Ukrainian Foreign Ministry informed of a series of telephone conversations with the governments of European Union member states concerning the issue of seasonal workers.

The Ukrainian government claims that it does not intend to limit the workers’ ability to work abroad. Mr. Shmyhal announced that his cabinet was ready to hold talks with the governments of Western countries, which “would like to officially invite Ukrainians as seasonal workers.” The requirements he mentioned include employment for a minimum period of 3 months, and “the provision of social guarantees and appropriate employment contracts for the Ukrainian workers.” On the part of Ukraine, the process would be coordinated by the Government Office for European and Euro-Atlantic Integration.

The Deputy Prime Minister Vadym Prystaiko, who is responsible for Ukraine’s European integration, spoke to the representatives of EU member states’. “The Prime Minister has authorized me to deal with the issue of organized labor migration to specific countries. We are now trying to determine how we could enable the people willing to work abroad to pursue such employment opportunities in an organized manner,” said Mr. Prystaiko.

“The government hopes that those Ukrainians who worked abroad recently will help in the country’s development. But we are aware that we cannot yet offer the most active members of our workforce a European level of wages. To the extent possible, we are expecting centralized measures on the part of the foreign governments interested in our workers. The departures and the arrivals of these groups of workers will be coordinated and organized, while the government will enable the associated charter flights,” he said while describing the plans of Ukrainian authorities.

If Western countries consented to such demands, then the employer-employee relations would be moved from the sphere of private law to the sphere of public law, which is dependent on the interference of government administration.

Labor migrants under house arrest

The Ukrainian government argues that its activities aimed at reducing the movement of economic migrants are influenced by the authorities’ concern for the citizens. However, most commentators hold a different opinion. They are pointing to the systemic significance of the government’s actions and the violation of Article 33 of the Constitution, which guarantees every citizen the legal right to go abroad. The implementation of the Ukrainian authorities’ requirements leads to the introduction of complete state control not only over the cross-border movements of workers, but primarily over the money earned by the migrants. In practice, the Ukrainian citizens would only be able to leave the country in organized groups on the basis of an agreement between the Ukrainian government and the prospective employer. The government’s proposals have little to do with the principles of cooperation resulting from the Association Agreement between Ukraine and the EU. The critics of this plan point out that by linking the citizens’ ability to work abroad with the submission of an employment contract, the government would obtain access to information about workers’ earnings. And this would open up the possibility of extorting various types of bribes from the employees and their families.

“It turns out that the free and fully enfranchised citizens of Ukraine can legally go abroad in order to legally work only with the consent of their government. This is equivalent to official state-run human trafficking activities,” said the political analyst Oleksiy Golobutsky.

The ideas for stopping emigration go even further. In June 2020, during the Ukrainian President Volodymyr Zelensky’s meeting with entrepreneurs in the city of Chernivtsi, it was proposed that those leaving the country to work abroad should pay back the cost of their school and university education. This idea, which shows the desperation of those trying to block the process of emigration, is especially peculiar considering the fact that the vast majority of Ukrainian graduates pay for their tuition out of pocket, just like in the case of medical services.

However, according to calculations carried out by Oleg Pendzin, the government has no chance of forcing the workers to stay in the country, because in Ukraine there simply isn’t enough money for that. According to Mr. Pendzin’s estimates, the creation of one job in Ukraine requires an investment of the USD50,000. In such a case the creation of 500 thousand new jobs would cost the USD25bn. This is a large amount even for Western economies, and in the case of Ukraine it is simply astronomical. Meanwhile, after the amendment introduced in April 2020, the state budget revenues are projected to reach about the USD34.2bn, while the deficit is supposed to reach almost the USD10.5bn.