Ukraine Market Report — Q2 2017
Visa-free travel to the Schengen area took effect in June. Its economic significance was not tourism — it was what it did to labour mobility and to how Ukrainians assessed their own options.
Overview
Visa-free short-stay travel to the Schengen area for Ukrainian citizens holding biometric passports took effect in June.
The economy continued its modest recovery.
What visa-free travel actually changed
It did not grant the right to work. It removed the friction, cost and administrative uncertainty from short visits, and it changed the practical relationship between Ukraine and the EU labour market in three ways.
It made exploratory travel cheap. Someone considering working abroad could now visit, assess and return without a visa process. The decision to emigrate became less irreversible, which paradoxically increased the number of people who took it.
It normalised circular movement. Seasonal and short-term work patterns, particularly toward Poland, became easier to sustain because the return journey was no longer administratively costly.
It changed the reference point for wages. A Ukrainian worker who had visited Poland had a direct, personal comparison for what their labour was worth elsewhere. That comparison put upward pressure on Ukrainian wages independently of Ukrainian productivity.
The third effect is the one with the largest commercial consequence. From 2017 onward, Ukrainian employers in labour-intensive sectors were competing not with each other but with employers in Poland, and the wage floor rose accordingly.
Macro position
Growth continuing. Inflation moderate. Currency stable. Labour shortages beginning to appear in construction, transport and manufacturing.
Sectors
Agriculture — strong.
Construction — recovering, with skilled labour availability the emerging constraint.
IT services — growing, and increasingly the sector Ukrainian graduates chose.
Manufacturing — facing wage pressure from the emigration option.
What the quarter settled
That Ukraine's labour cost advantage was now bounded by Polish wages rather than by domestic conditions, and that any business model built on cheap Ukrainian labour needed to account for a floor that would keep rising.
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