Unemployment rate increases in Ukraine due to poor state of economy and outdated education system

2017 Mar 21

The contraction of the Ukrainian economy resulted in an increase of unemployment. While countrys economy steadily recovers, the pre-crisis rate of unemployment still seems hard to achieve. 

The Economic downturn, as well as reduction of business activities,  provoked the increase of unemployment rate. Some companies went bankrupt while others started cutting expenses including those for staff. The increase of minimal wage rate up to UAH 3200 also played its part in this game. It forced companies which were unable to increase their wage funding to shift their employees to part time employment or even to an unofficial one. The increase of minimal wage rate also negatively influenced small enterprises operating under the simplified tax system.

Unemployment restrains economic development  

Unemployment causes a negative socio-economic impact on the state and its population. The government loses millions in taxes while increasing expenditures for payment of unemployment benefits. According to the Okuns law increase of unemployment rate by 1% over the countrys natural unemployment rate, results in GDP decrease by 2-3%. In the meantime, the unemployment benefits are so small that its practically impossible to get by with it.  

Another negative consequence of the unemployment increase is the additional financial burden it creates for employed population. Taking into account existing demographic crisis in Ukraine the trend gets even more severe, resulting in a permanent increase of social contributions deducted from salaries to the Pension Fund.  

The highest unemployment rate is amongyoung adults under 24 years old  

According to the State Statistics Service of Ukraine the unemployment rate in Ukraine increased by 2% in 2014 and since then remains at the same level. In the first half of 2016, the unemployment rate was 9.4%, while the situation with unemployment among youth was, even more, alerting amounting to 14.7%. The unwillingness of young adults to take blue-collar jobs, as well as relocate to rural areas and be employed in the agricultural sector are key factors contributing to the high unemployment rate for this category of population. The highest unemployment rate is among young males from 15 to 24 years old (25,6%), while this indicator for females of the same age group is 6% lower.

The unemployment indicators significantly differ depending on the region  

The key reasons behind this are the different level of economic development of regions as well as a volatile political situation in some of them. The lowest unemployment rate is observed in Odessa, Kyiv, and Dnipropetrovsk regions, while the highest is registered in Lugansk, Donetsk and Poltava areas.

At the same time, the correlation between the proposition and demand for the workforce in regions differs significantly. On average, there are 95 applicants per 1 vacancy in Ukraine, compared to 105 applicants last year. This is explained by the fact that the number of vacancies has increased this year. Volyn region has recently appeared among 3 leading regions with the lowest number of applications (59) per 1 vacancy having taken on Dnipropetrovsk region. In the meantime, Hmelnitskiy region joined the list of top 3 regions with highest application rate (205) per 1 vacancy having outpaced Poltava region.

The senior management positions are hardest to find  

Today senior managers are least likely to find employment, while processing industry specialists are most likely to succeed. Traditionally there are a lot of sales managers and sales assistants vacancies on the market. Compared to 2015 the demand for employees increased across all sectors, while in financial sector it skyrocketed by 110%. 

Choosing the profession with the highest level of demand on the market is the first step towards employment  

Another reason behind high unemployment rate is that people choose professions which are not demanded by the market. As a result, Ukraine has an excess of specialists in certain industries and lack in others. Additional training and change of profession of those temporary unemployed coupled with comprehensive reforms of secondary and higher education may become a solution to this problem. When choosing a profession one has to pay attention not only to a number of vacancies in this or that sector but to the trends as well: decreasing demand for specialists in a particular sector may indicate that certain professions will become irrelevant soon. On the contrary, the increasing demand for certain specialists demonstrates that in the nearest future the particular sector will offer broad opportunities for the career development. 

The decrease of unemployment rate will stimulate the growth of the Ukrainian economy. At the same time overcoming this challenge requires a number of changes, including the formation of the demand for certain specialists from the side of the government, the introduction of relevant education subsidies and as well as the implementation of comprehensive economic reforms supplemented with investments attraction.


 


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