Ukraine’s Future Manpower

Introduction

Russia’s full-scale invasion of Ukraine in February 2022 has had an immense human cost, producing a level of physical destruction, human suffering, and displacement not seen in Europe since World War II. Since the war began, a large share of Ukraine’s workforce has emigrated or relocated within the country, enlisted in the military, or tragically become a casualty of the violence. In addition, unpredictable changes to the conscription and mobilization of men have significantly compressed the labor supply.

This difficult workforce situation affects business operations across Ukraine and threatens the country’s future reconstruction and growth prospects. According to an October 2024 survey by Ukraine’s Institute for Economic Research and Policy Consulting, labor shortages are the private sector’s top concern, with more than 60 percent of the companies consulted finding it difficult to hire qualified workers. At the same time, recent estimates show that the current unemployment rate in Ukraine stood at 12.7 percent in late 2024, meaning unemployment coexists with labor shortages that reflect pervasive skills mismatches across regions and sectors of the economy.

Even before the war, Ukraine was experiencing a challenging demographic scenario characterized by low birth rates, premature mortality among men, and emigration of young Ukrainians looking for better economic opportunities abroad. As a result of these negative trends, Ukraine will have a large deficit of workers in the future. The International Labor Organization (ILO) estimates the country will need an additional 8.6 million workers by 2032 (compared to 2022). The government of Ukraine, working with the international community and relevant stakeholders, will have to develop and implement a comprehensive human capital strategy to address current and future workforce needs. This will require a combination of short-term and long-term actions that seek to expand the country’s talent pool.

Ukraine’s Demographic and Workforce Challenges

Ukraine’s current workforce challenges are part of a larger demographic problem. The country’s birth rate is now the lowest in Europe: below 1 child per woman, compared to Eastern Europe’s average birthrate of approximately 1.3–1.8 children per woman. Moreover, high rates of premature deaths—especially among men—due to alcoholism, accidents, and lifestyle choices have contributed to the decline in population. Other ongoing trends such as emigration, overall poor health, and rapid aging have complicated the demographic landscape of the country (see Figure 1).

▲ Figure 1: Ukraine’s Annual Population Growth, 2015–2023. Source: “World Development Indicators: Ukraine,” World Bank Group.

The last Ukrainian census, conducted in 2001, recorded a population of 48.5 million. Due to the war, many Ukrainians have emigrated abroad, an estimated 20,000 Ukrainian children have been forcibly deported to Russia, and thousands more are living under Russian occupation. Sadly, many Ukrainians have also perished. As of December 2024, President Volodymyr Zelensky reported that 43,000 Ukrainian troops have been killed. In addition, approximately 12,000 civilians have died and thousands of Ukrainians have been injured or disabled. According to the UN High Commissioner for Refugees (UNHCR), as of November 2024 there are around 4 million internally displaced people (IDPs) in Ukraine, 6.8 million refugees registered in other countries, and approximately 14.6 million people are in need of humanitarian assistance. As a result of these trends, Ukraine’s population has fallen to an estimated 35.8 million as of July 2024—or 31.1 million if considering only the areas where the government of Ukraine exercises full authority. If this situation is not addressed, the population of Ukraine could further shrink to 28.9 million by 2041 and to 25.2 million by 2051, according to Ukraine’s National Academy of Sciences.

Population declines and labor force contraction are producing a severe shock to Ukraine’s economy, with negative effects to be felt for years to come. Empirical studies indicate that time out of work can not only lead to the depreciation of skills, but also impacts national productivity and wages. A protracted conflict will have even more serious implications for educational attainment, which will have its own negative impacts on Ukraine’s future human capital. Due to wartime, schooling has been disrupted and children have therefore experienced learning losses. All in all, initial research by the Organization for Economic Cooperation and Development suggests the war in Ukraine will reduce the total factor of national productivity by 7 percent by 2035.

Moreover, poor mental health affects individuals and has ripple effects on society and the economy. Even before the latest war, an estimated 30 percent of the Ukrainian population had a mental health condition at some point in their lives. Within the first year of Russia’s invasion, an estimated 26 percent of Ukrainians met diagnostic requirements for post-traumatic stress disorder (PTSD) alone. Although the added impact of mental health conditions and disabilities is difficult to quantify, it does lead to job absenteeism and loss of productivity. There is consensus that investments in mental health far outweigh the socioeconomic costs of leaving individuals untreated.

Challenges for Women and Veterans

Even before the war, the Ukrainian labor market faced inefficiencies and inequities and was not reaching its full potential. In 2020, there were more than 10 million working-age Ukrainians (between 15 and 70 years) outside the labor force. Some of them were pensioners and students, but working-age women were also not actively participating in the labor market. While the labor force participation rate in Ukraine was 67 percent in 2021, the average for Central Europe and the Baltic States was approximately 73 percent (Figure 2). As discussed above, the war caused more people to exit the workforce, shrinking it by over 25 percent in 2023 compared to 2021.

▲ Figure 2: Labor Force Participation Rate, 1991–2021. Source: “World Development Indicators: Ukraine,” World Bank Group.

Within this context, there are unique challenges that women and veterans are facing in the economy. Before Russia’s invasion, there was a prominent gender gap of 15 percentage points in workforce participation and a wage gap of 18.6 percent. The war has compounded the preexisting structural disparities in the Ukrainian economy, with the wage gap now more than 30 percent. Moreover, of the 5.4 million IDPs as of January 2023, 55 percent were women and girls.

The war has also altered Ukrainian women’s role in society and the economy. They are expected to care not only for their children, but also for the elderly and other family members with reduced mobility. Outside of household obligations, women are also increasingly heading family businesses. According to recent estimates, more than half of the new businesses launched during the war are led by women. However, they are often sole proprietors, while bigger companies are predominately run by men. According to a study by the U.S. Agency for International Development (USAID) and the Investment and Trade Facilitation Center, women entrepreneurs are most active in sectors such as services, trade, education, and creative industries.

Veterans are also an important demographic group for revitalizing the nation’s economy. Once the war ends and the government launches the demobilization process, veterans are expected to number more than 5 million, most of them of working age. Successfully reintegrating veterans into the economy will be an important channel through which Ukraine can address its human capital issue. Veterans bring both hard skills (for instance in mechanics, operating machinery, and telecommunications) and soft skills (such as resilience, teamwork, leadership, adaptability, and creativity) from their battlefield experience that can be applied to many sectors and occupations. Estimates from Ukraine’s Ministry for Veterans Affairs indicate that any money invested in the rehabilitation of veterans will see a sixfold return on investment for the economy. Moreover, veterans will be integral to building social cohesion and reconstructing Ukraine. As such, they are advocating for fair, transparent, and efficient programs to better support their reintegration.

Since Russia’s full-scale invasion in 2021, Ukrainians’ trust in the armed forces has been at an all-time high, surging to 96 percent in September 2022. Despite the value placed on veterans and the government programs aimed at assisting them, this group still faces many reintegration challenges. According to a recent poll, among the main challenges Ukrainians believe veterans will face when integrating back to civil life include “psychoemotional instability, issues with physical health, difficulties in accessing medical assistance, the absence of inclusive spaces and adapted workplaces for individuals with disabilities, as well as challenges related to the processing of social benefits.” Of the roughly 300,000 Ukrainians who have been severely injured and disabled due to the war, the majority are veterans. Unfortunately, many spaces such as apartment buildings, private sector workspaces, educational institutions, and government facilities are not designed to be accessible—lacking, for instance, ramps or elevators. This acts as a significant barrier to both the employment and daily activities of disabled Ukrainians.

According to government estimates, unemployment among veterans is currently double that of the civilian population, at more than 30 percent. Organizations working with veterans point out that employers are reluctant to hire them since there is a stereotypical view that all veterans have mental health problems and are affected by PTSD. In addition, people in the workplace often do not know how to interact with veterans and lack tactful communication skills. Very few companies have good onboarding processes, especially when it comes to employing veterans. At the same time, the average pay in the armed forces is usually higher compared to other sectors. Many veterans thus prefer to start their own businesses since they can command a higher income and do not have to interact as much with coworkers who might have certain biases toward them.

Ukraine has a State Employment Service that helps with job matching and training. The agency has programs for women, IDPs, veterans, and other categories of unemployed workers to help them find jobs and provides micro-grants for entrepreneurs. The Ministry for Veterans Affairs also offers training, vouchers, job matching, and opportunities for veterans to help them start businesses. However, these agencies could serve these demographic groups more effectively. For example, there is a lack of interagency effort to advertise programs for veterans, especially in smaller towns and rural areas. In addition, while younger veterans can access digital platforms that promote jobs and support programs, older ones may have more difficulty with technology and getting this information. As a result, surveys find that many Ukrainians—especially those living in western regions and relatives of army members—feel the state is not fulfilling its obligations to veterans. This negative sentiment has been steadily rising; in August 2022, 69 percent believed that “the state fulfills its obligations to veterans,” but only 25 percent did by March 2024.

In addition, there are regulatory bottlenecks that prevent women, people with disabilities, and veterans from being more active in the workforce. The Labor Law of Ukraine, adopted during the Soviet period, is more than 50 years old. While some parts of the code have been updated, it remains largely unchanged and still contains archaic, unfair, and rigid labor regulations. For example, overtime is not allowed, there are few provisions for remote or gig work, and working women with children under three are still barred from traveling for business. Legislation and lack thereof also presents an obstacle for disabled people—such as the lack of anti-discrimination policies and requirements that they obtain employment permits that are valid only for one sector.

These obstacles are even more numerous for the many disabled veterans. Currently, there is a provision that if the Central Military Medical Board considers someone physically or mentally unfit to serve in the Armed Forces of Ukraine, they are likewise barred from joining the National Police Service in any capacity. Easing some of these requirements, depending on the degree of disability, would provide workers and employers more flexibility and improve the functioning of Ukraine’s labor market.

Current Initiatives and Potential Solutions

For a long time, Ukraine lacked a vision for comprehensive demographic development, but the government has now started taking steps to address these issues, particularly as they apply to the workforce. Under the EU Ukraine Facility, it has prepared the Ukraine Plan outlining four major areas of focused development: education and skills, healthcare access and rehabilitation services, reintegration of workers into the labor market, and increasing the economic and social capacity of the population. This plan will also play an integral role in institutional overhauls viewed as imperative to successful EU accession.

More recently, on September 30, 2024, the Cabinet of Ministers released the Strategy for the Demographic Development of Ukraine until 2040. Developed by the Ministry of Social Policy with support from a variety of national and international partners, the strategy lays out six important goals:

• Create conditions for immigration and reducing Ukrainian emigration;

• increase the birth rate and support growing families;

• reduce the premature mortality rates;

• increase workforce participation and modernize the labor market;

• encourage IDPs to return home or relocate to areas with labor shortages; and

• improve overall quality of life in Ukraine.

With the help of international partners, in November 2024, the Ministry of Social Policy approved the action plan that details how to operationalize the strategy until 2040. The plan puts emphasis in six main areas:

• Supporting the growth of birth rates and families;

• reducing premature mortality;

• attracting migrants and promoting the return of Ukrainians from abroad;

• promoting active longevity;

• developing infrastructure for quality living; and

• increasing employment for vulnerable groups.

In particular, the economic empowerment of Ukrainian women has been a major focus of the wartime government. In December 2022, the Cabinet of Ministers adopted the Strategy for the Implementation of Gender Equality in Education until 2030, to ensure equal rights and opportunities for women and men in education. In September 2023, the Ukrainian government also enacted the National Strategy for Reducing the Gender Pay Gap until 2030, which seeks to address wage disparities in the labor market and the unequal distribution of domestic responsibilities between men and women.

At the request of the government of Ukraine, the ILO modeled alternative scenarios, examining labor inputs across different economic sectors. It found that Ukraine will need 8.6 million additional workers between 2022 and 2032 to achieve the country’s GDP targets. These labor market projections indicate that around 60 percent of additional employment would be in the service sector, 27.4 percent in industry, and 12.6 percent in agriculture. Around 35.4 percent of new workers would be in high-skill jobs, 47.6 percent in medium-skill jobs, and 17 percent in low-skill ones.

In light of these projections, Ukraine has an opportunity to broaden its labor force and incorporate underserved groups into the economy: women, veterans, people with disabilities, older workers, and IDPs. Given the increasing role women and veterans have been playing due to the war, these groups should be part of the policymaking process and future reconstruction talks. Although the United Nations has found that women play big role in peacebuilding and reconstruction, for instance, they are often excluded from the labor market, formal peace processes, and overall decisionmaking. The EU accession process will provide Ukrainian women additional opportunities for more economic empowerment and inclusion. Ukraine also needs to address veterans’ reintegration, as well as the social frictions between Ukrainians who stayed in the country and those who decided to leave. Veterans are especially sensitive toward the issue of transparency—whether in recruitment, training, or workforce incentives.

There are numerous opportunities to integrate Ukrainians into the labor market and stem the country’s massive brain drain. This will include both short-term and long-term efforts:

Short-Term Measures

• Design “quick” training programs to increase labor force participation. Not all jobs in Ukraine require a university degree or a high level of skills. A fair amount of them demand intense physical labor, and Ukraine needs to have people who are trained and ready for these jobs. Women could be incentivized to join sectors that are traditionally male-dominated, including energy, trade, transport, construction, and information technology. In particular, there are opportunities to incorporate women, veterans, and older workers into the defense-industrial complex, renewable energy, and cybersecurity—sectors that will play an important role in strengthening Ukraine’s security. Training women for blue-collar jobs could also be beneficial. For example, one training program is targeting women to become truck drivers, of which there is currently a shortage. Similarly, women are being trained and hired to do more physically demanding jobs, such as manufacturing steel (as at ArcelorMittal’s plant) or military equipment. There are also significant immediate needs in the healthcare sector, where not all jobs require extensive medical training. Programs like Lecturio and others offer a range of online training modules that are specifically designed for healthcare workers in conflict zones.

• Create an integrated veterans’ platform linked to the municipalities. Although there are programs to support veterans, they are not interconnected and not widely known among the target group. In this regard, building a unique platform tied to municipal governments (hromadas) would make it easier for veterans to search for information about support programs, access benefits, and receive career guidance showing how different occupations contribute to the economy and to the construction of a modern Ukraine. Financial literacy among veterans and their families is severely lacking, and although veterans receive various forms of financial support, it is important to provide them with guidance on spending and investing their money to make the best use of it. This would not only help them integrate into civilian life but assist them with long-term planning.

• Modernize public employment services. The Kyiv School of Economics has recommended specific steps to modernize the State Employment Service (SES) to make it more valuable for jobseekers and employers. One effort would be to decentralize the agency by placing services within city administrations, which have a more accurate picture of the social challenges and the business activities within their jurisdictions. Moreover, business associations and civil society organizations that work with vulnerable groups can be better linked digitally to the employment service, for example, through Diia, a digital portal that allows citizens to access more than 100 government services. Donors such as Estonia are providing technical assistance and training to SES staff to improve the functioning of the agency and align it with EU standards.

• Reform the Labor Code to provide more hiring flexibility. Although labor reform is by no means an easy task, there are certain provisions that could provide more leeway in hiring various employees. This includes allowing nighttime and remote work, for example, and eliminating special restrictions on categories of workers. To this end, a new code has been drafted and is currently being discussed in Ukrainian Parliament.

• Launch targeted training for companies and business associations. This entails developing a national program to train employers to effectively integrate and support veterans in the workforce, taking into consideration mental health and trauma-informed management. Companies and business associations could also offer courses for managers and human resources staff on how to onboard veterans and IDPs, as well as how to communicate with them in the workplace. In order not to alienate veterans, there is a need for better education and communication so that they are treated not as victims but as part of society at large.

Medium- to Long-Term Measures

• Develop a comprehensive skilling strategy. To foster an experienced and adaptable workforce, the government of Ukraine will have to partner with businesses and universities in driving both skilling and upskilling efforts, utilizing quality online learning platforms to ensure broader accessibility for users across regions. One example of such a partnership is the recently launched ReSkillUA In addition, leveraging technology and artificial intelligence (AI) solutions will be critical in identifying skills gaps within the workforce, thereby enabling the development of tailored, individualized training programs so workers can meet the demands of the future. To support these initiatives, a diaspora fund that attracts remittances and foreign investment could provide part of the financing for innovative skilling projects.

• Develop targeted programs for vulnerable groups. To fully integrate all segments of society into the labor market, Ukraine will need more investment into assistive technologies for veterans and people with disabilities. Unfortunately, given the number of soldiers and civilians that lost limbs, the need for prosthetics is high. Ukraine could potentially become one of the major leaders in prosthetics technologies. It is equally important to provide relevant services for disabled citizens, from accessible houses to workplace accommodations. In this regard, Ukraine needs to find more creative solutions for housing, including modular construction and the repurposing of vacant offices or government buildings.

In addition, a “care economy” that provides childcare, elder care, and healthcare would help ease the burden on those—particularly women—who have not been able to seek work due to the need to take care of their relatives. This would also create enormous possibilities for launching small- and medium-sized enterprises and give women more opportunities to start businesses and participate in the labor force.

• Increase investment in mental health. Tackling Ukraine’s human capital issue is not just about learning and skills, it will require a whole-of-person approach that addresses basic physical and mental health as well. Although Ukrainian First Lady Olena Zelenska has made mental health a priority, making headway on this front will necessitate significant investments and reforms to the current system, which still has a strong practice of institutionalizing patients. Among the priorities are to increase outpatient facilities and make mental health interventions more community based. According to some estimates, such preliminary efforts will require doubling current mental health investment over the next five to ten years.

• Modernize technical and vocational education and training (TVET). As already mentioned, not all jobs will require a university degree, and not all future jobs will be in new fields such as tech and renewable energy. Although there is a recognition that technical and vocational education is needed, these professions have lower prestige in Ukraine, and workers encounter a range of stereotypes. Ukraine should reform its TVET system to better align it with the needs of employers and provide more avenues for workers to learn on the job through internships and apprenticeships. In this regard, it will be also important to educate youth in secondary schools about the different career opportunities that exist for them and promote vocational and technical education as a reputable career path.

• Develop a comprehensive immigration strategy. Beyond safety, pay differentials between Ukraine and neighboring countries also prompt many people to emigrate. Although wages in Ukraine have been rising, they are still much lower than in EU countries. Developing and implementing a comprehensive immigration strategy could entice Ukrainians to come back and attract other migrant populations. Elements of the strategy could include incentivizing IDPs to relocate to certain parts of the country to address skills gaps, offering income tax incentives for qualified prospective immigrants, encouraging countries with large numbers of Ukrainian refugees to help finance the Ukrainian government (such as various European nations funding Ukrainian pensions and the United States covering the salaries of first responders), or collaborating with diaspora organizations to promote opportunities and facilitate the return of Ukrainians living abroad. Developing partnerships with foreign businesses and government agencies that could second their employees to Ukraine might also be an innovative option.

Conclusion

The most important asset for Ukraine’s present and future development is its people—so the process of expanding and strengthening Ukraine’s human capital should start now, not once the war is over. In this regard, there are numerous opportunities to integrate more Ukrainians into the labor market and prevent further brain drain. This will require efforts to support demographic groups that have historically not fully participated in the labor market, including women, veterans, persons with disabilities, and older workers. Given the increasing role that women and veterans have been playing in the economy due to the war, these groups should also be part of the policymaking process and future reconstruction talks.

Romina Bandura is a senior fellow with the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS). Ms. Bandura is an economist with more than 20 years of experience in international development research, policy analysis, and project management. Her current research focuses on foreign aid and development finance, Ukraine recovery and reconstruction, digital transformation, financial inclusion, and the future of work in developing countries.