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  • Writer's pictureКущ Олексій

Ukraine needs a program of repatriation of people to their homeland, - Oleksiy Kushch

The state can create positive and negative incentives for population growth.

Negative incentives include a ban on travel, forced activation of fertility (anti-China - to force women to "give birth").

All of the above negative incentives can only be implemented in the format of a totalitarian state.

In their pure form, they were cumulatively applied only in Nazi Germany.

For example, in 1935, the SS founded the organization Lebensborn ("Source of Life") in Berlin.

SS officers "impregnated women," and after birth, the child was handed over to the state for upbringing.

In Ukraine, the reincarnation of ideas about the "development of the nation" can only be attributed to the specifics of the mental reactivity of individuals during the war.

In the realities of the 21st century, no one in their right mind would propose to "limit" anything in order to "save the nation" except a recorded marginal.

Political actors in Ukraine should engage in a discourse about creating positive incentives to get out of the demographic hole.

First of all, the issue of security must be resolved.

Then - the formation of the necessary incentives. For example, maternity capital, tax incentives (a tax credit for each child in the amount of the real subsistence level).

Free education, recreation, social development, health. The air children breathe and the water they drink.

Organization of summer vacations, compensation for young families' expenses for nannies for children.

Mortgage. Reimbursement of expenses for school preparation, etc.

Ukraine needs a program of repatriation of the population to the homeland: re-patriation, returning home.

As Israel once had a similar program called Aliyah.

Yes, we need our own Ukrainian Aliyah.

Otherwise, Ukraine will become a state whose diaspora exceeds the number of residents inside the country.

After the war, our growth problem will be as follows: if Ukraine does not return migrants, it may lose another 5 million people.

In order to maintain economic growth of more than 5%, Ukraine will have to solve the problem of compensating for the labor shortage.

It would seem so easy to calculate a possible confidence interval for the growth of the domestic gross product using conventional empirical models, especially if they are based on the experience of other countries, such as Singapore, which is a favorite in political expert circles.

Singapore has become a kind of role model for us, both in terms of fighting corruption and in the context of economic development.

However, we have not yet gone beyond simple linear comparisons.

On the other hand, the complexity of the Ukrainian economy is significantly higher than that of Singapore, just look at the publications of the international Observatory of Economic Complexity (ComplexityEconomics), created by Harvard professors Ricardo Gausmann and Cesar Hidalgo.

In the competitiveness assessment models used by the World Economic Forum in Davos to classify countries by type of economic growth, Ukraine was in the bottom basket of "factor" countries, i.e. economies that rely on some basic, internal factor of competitiveness or a combination of them.

For example, in Saudi Arabia, it is oil.

We have a whole set of quasi-incentives that arose against the backdrop of energy shortages.

At different times, these were:

- cheap labor (this factor began to rapidly disappear in the early 2000s);

- cheap Russian gas received in exchange for political concessions to the Russian Federation;

- the lease nature of land use, when agricultural producers did not divert financial resources to buy land and invested in the development of their farms;

- state protectionism of certain sectors of the economy (a factor in the process of fading);

- high commodity prices (a cyclically renewable factor that is currently in a sideways trend).

We have not been able to move to the second basket of countries where labor productivity is the basis of competitiveness (a marker of a number of successful developing countries that have national industrial policies).

At the same time, our quasi-factors of competitiveness are gradually fading.

Skilled labor in Ukraine is no longer so cheap, energy costs are higher than in our economic competitors, liberalization of the land market threatens to destroy the established business models in the agricultural sector, and the government has completely abandoned its sovereign industrial policy.

And, of course, we are still a long way from moving into the third group of the world's most developed economies, where the factor of competitiveness is innovation, creative development model and knowledge economy.

Although this classification is no longer used by the WEF, as the world is becoming more complex, it is generally a fairly indicative stratification of countries by type of economic growth.

So, on the one hand, Ukraine will soon lose its existing basic quasi-factors of competitiveness.

On the other hand, tomorrow our country will have to pass another test of competition in the system of global labor market division for a place in the global value chain.

And all this against the backdrop of global defragmentation, the reset of key global markets and business models of interstate industrial cooperation.

But can Ukraine's demographic base sustain the dynamic pace of economic development?

In economic science, we use the Owen Law, developed by Arthur Melvin Owen, chairman of the US President's Council of Economic Advisers in 1968-1969, a neo-Keynesian and author of the concept of the "misery index", a scientist who was included in the rating of "100 famous economists after Keynes".

The essence of this law is as follows:

There is a certain empirical relationship between the GDP growth rate and the dynamics of the unemployment rate.

For example, a 2% reduction in the gross domestic product growth rate leads to an average 1% increase in unemployment.

For the basic model, the GDP growth rate is assumed to be 3% annually.

Naturally, there are a wide range of tolerances and limitations to the application of this law depending on the type of economy, regional differences, etc., but in general, it is a good way to test the potential of such a source of growth as human capital.

In Ukraine, since 2010, when our State Statistics Service began publishing data based on the International Labor Organization's methodology, there has been a steady decline in the number of economically active people (EAP) aged 15 to 70.

In 2010, there were 20.9 million such people, and in 2015-2021, there were about 17 million.

Although the key reason for the decline in 2014 was the occupation of Crimea and parts of Donbas, a slow decline in this group can be considered the norm in Ukraine due to the demographic situation.

Currently, the economically active population is at risk of falling to 14 million people.

It should be noted here that the economically active is the age range from 16 to 65.

The relative unemployment rate in Ukraine according to the ILO methodology for the analyzed period ranges from 7.8% to 9.9% (extremes).

This is an indicator in which the number of unemployed persons of working age is correlated with the number of economically active population of the corresponding age group.

The ILO methodology is not fully adapted to the demographic parameters and labor market indicators in Ukraine, but it is the only possible assessment methodology, as it is based on the existing parameters of the formation and structuring of the global labor market, and it is on this basis that pension and social reforms in countries such as Ukraine are developed.

In other words, as a result of reforms that bring Ukrainians' living standards closer to the generally accepted ones, citizens of our country "should" live and work longer and start their labor career earlier.

Today, this is unrealistic, but the UN expects an increase in the proportion of workers over 60 in economies like ours.

If we estimate the share of the economically active population in the total population of the country, we will see that since 2010 the figure has decreased from 46% to 41%.

Simply put, already in 2010, more than half of the country's residents were not economically active, and the situation has only gotten worse since then.

Now, let's get back to the Oaken Law.

There are different numerical interpretations of the relationship between GDP and unemployment described by the economist.

For example, there are calculations that show that each new percentage point in the unemployment rate is minus 3% in GDP dynamics.

But what about the inverse relationship?

The so-called Chaddock scale will help us here, which shows that there is a connection between these indicators, but it is not complete, meaning that each country may have its own variants: 1 to 3 or 1 to 2 when GDP falls and unemployment rises.

But the inverse relationship "GDP growth - unemployment reduction" works differently.

Studies by economists based on the parameters of the Russian economy have shown that with a 1% increase in GDP, the unemployment rate decreases by 0.25% over a three-quarter time interval.

The example of the Russian Federation is important to us because the Russian economy has tested this dependence in practice: a sharp stimulation of economic activity through government incentives has led to a situation where the level of unemployment has hit a structural minimum of 3%, which is almost impossible to overcome.

There is one caveat to be made here: the rise/fall in unemployment in the context of GDP dynamics is estimated only at a level that exceeds the so-called structural unemployment of 3-4%, which will always exist, unless we are analyzing a totalitarian economy.

How should these figures be interpreted in the Ukrainian context?

If we subtract structural unemployment, we have about 5% of the economically active unemployed population that could theoretically be involved in economic turnover.

As a basic assumption, we can accept the version that the size of this population group will decline in absolute terms under the influence of natural demographic factors at the level of the last few years.

In this case, GDP growth of 15% will lead to a reduction in unemployment by 3.75%, i.e., according to a rough estimate, it will approach the structural level.

The main absorbers of labor resources will be those industries that are the largest employers, i.e., trade, repair and services, transportation and communications, and manufacturing.

High rates of development without creating a new industrial core are impossible in the Ukrainian reality, so the most scarce area will be the talent pool for industry, as the trade and services sector can attract labor resources from "extreme" age subgroups (under 25 and over 60), as well as low-skilled personnel.

The transportation and communications segment will provide an influx of new labor resources due to the growth of competitive wages.

The most problematic area is industry, where the use of "extreme" age groups is limited and there are relatively high requirements for staff qualifications.

At the same time, the level of wages here is not high enough to stop labor migration from Ukraine.

In this development paradigm, our country has several options, including

- either building up the existing industrial potential (with a shortage of labor resources according to the Oaken Law);

- Increasing labor productivity, but this will require attracting at least $10 billion of foreign direct investment (FDI) per year in the real sector of the economy;

- or "utilization" of the industrial core and transition to a service economy (with an emphasis on the service sector).

In the latter case, there is a danger that Ukraine may lose another 5 million people who will go to work abroad, and large metropolitan areas (except Kyiv) will degrade.

At the same time, the country needs to ensure a high level of personal security, infrastructure development, and a high-quality environment for microenterprise.

Of course, the increase in labor migration will not be caused solely by job losses in industry:

This is a multiplier effect, when family members migrate, employment in related service segments of the economy and the service sector decreases.

For example, when a city-forming enterprise stops operating, the entire city suffers, not just its employees.

In terms of the likelihood of the above scenarios, there are certain nuances.

The "service" option is the most mentally close to the current government, but it does not even realize the complexity of its implementation in the current Ukrainian realities.

Moreover, this option is fraught with total economic disaster, as in the proverbial "do or die" situation:

you can completely destroy the industrial core and not build a high-quality service economy.

The option with $10 billion of FDI and productivity growth is still good only at the stage of presentations and election political programs.

The most likely scenario is to build up the existing potential, but here we are trapped by the Owen's Law:

Given the high GDP growth rates in this model of advanced development, the potential in the form of available labor resources, including the personnel reserve, will be exhausted in five years.

The rapid growth of the Ukrainian economy in the early 2000s was based on the old demographic base, which no longer exists.

Labor migrants from the poorest countries could potentially change the situation.

If we look at wage rates according to the ILO, we can only be interested in workers from countries where per capita labor income is less than $200 per month.

If we do not take completely exotic and distant countries, these may be:

Cambodia, Syria, and a number of African countries such as Mozambique, DRC, Congo, and Chad.

The extent to which people from Africa could become Ukrainian chemists, metallurgists, and rocket scientists is a complicated question.

And the point here is not discrimination, but the fact that African countries are actively implementing their national industrial policies, and the surplus population that is not absorbed in this process goes to work in the EU and the US, usually in the service sector.

Or they migrate to highly developed countries in search of social benefits.

The days of Vietnamese weavers working in the light industry of the Ukrainian SSR are a thing of the past.

So is the stereotype of Indians working for one dollar a day.

For example, India, with more than $500 in net wages per month (only the official sector), is in the 80s of the ILO ranking, far ahead of Ukraine, which is in the second hundred countries.

Thus, the only way out for us is to remember our "economic complexity", change the state's social policy and return the lost labor potential in proportion to the parameters of the national industrial policy.

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