The labour market got tight, and wages moved

The single most consequential change in the Ukrainian economy in recent years is not a policy. It is that labour became scarce.

How it happened

Several things at once. Very large outward migration, first economic and then forced. Mobilisation removing working-age men from the civilian labour force. A demographic structure that was already narrowing, because the cohorts now entering the workforce were born in the low-birth years of the late 1990s. And internal displacement, which moves people but does not always move them to where the jobs are.

What employers did

Raised wages, which was the first and most obvious response, particularly for skilled trades, drivers, welders, machine operators and anyone in construction. Then, when raising wages stopped being sufficient, they started doing the things that labour-scarce economies do: hiring people they previously would not have considered, training rather than recruiting ready-made, and automating tasks that were cheaper to do by hand when hands were cheap.

Who benefited

Workers, unambiguously, and particularly at the lower end where wages had been stuck for years. Women entered occupations that had been informally closed. Older workers stayed employed longer. Regional wage gaps narrowed somewhat, because an employer in a smaller city can no longer assume that people will work there for less.

What it demands

An economy short of labour cannot grow by adding workers; it has to grow by making each worker more productive. That means capital equipment, training and better management — the unglamorous things.

It also raises the value of everything that brings people back: housing, schools that function, safety. Return migration is now an economic policy question, not only a humanitarian one.

I knew the labour market had turned not from the job listings but from the time to hire: we used to wait a week for a welder and then began waiting three months. That change came before the wages, and the pay rises followed it. What I have learned as an employer is that in a tight market you compete on conditions and training rather than on salary.