This document summarizes key labor market challenges and skills gaps in Ukraine. It outlines a World Bank work program on skills and labor markets in Ukraine, including analytical reports, skills measurement surveys of households and employers, and an assessment of vocational education. Major challenges include low employment rates, a declining workforce, and skills mismatches. Many firms consider skills shortages a severe constraint. The surveys aim to better understand the distribution of skills in the workforce and demand across sectors to inform policy dialogue, though engagement remains difficult given limited lending.

1. Skills and Labor Markets In
Ukraine
Work in Progress and Policy Dialogue
Indhira Santos
April 29, 2013

2. Outline
1. Key labor market challenges in Ukraine
2. Overview of work program on skills and labor
markets
3. The importance of skills gaps
4. Measuring skills gaps in Ukraine
5. Feedback into the policy dialogue

3. Key labor market challenges in Ukraine
2
1. Employment rates at 60 percent and very low labor productivity
 Informality
 Lack of dynamism on the side of firms and low internal mobility
 Skills gaps
2. Ageing and declining labor force
On the skills side…
1. Unreformed education system
2. High levels of formal education, but the “wrong” skills?
 100% literacy
 80% gross enrollment rates in tertiary education
3. A generational gap? Two transitions

4. Overview work program (1)
2
1. Just-in time support to the labor market policy-related
requests from the Government
 Labor code reforms, informal employment, modernization of the labor
inspection, active employment policies and youth employment
programs
2. In depth analytical work
 Report “In Search of Opportunities: How a More Mobile Workforce Can
Propel Ukraine’s Prosperity”
 Case study on Ukraine for the World Bank Development Report 2013 on
Jobs

5. Overview work program (2)
2
3. Skills Measurement Surveys
 Distribution of various skills in the labor force, as well as of the demands
for those skills from different economic sectors
 Household Survey: ongoing
 Employer Survey: planned
4. Systems Approach for Better Education Results (SABER) -
Workforce Development (planned)
 Institutional benchmarking of vocational education and training

6. The importance of skills gaps (1)
Skills are an important constraint for many firms in Europe, and particularly in Ukraine
(Distribution of firms that consider skills as a major or very severe constraint, 2008)
0
1
2
3
4
5
6
7
8
9
x < 10% 10% ≤ x <
20%
20% ≤ x <
30%
30% ≤ x <
40%
40% ≤ x <
50%
50% ≤ x <
60%
60% ≤ x <70% 70% ≤ x <
80%
80% ≤ x <90%
Numberofcountries
EU10+1 and Turkey Western Balkans LI CIS MI CIS
AZE
BIH
KOS
MKD
SRB
SVN
ARM
GEO
KGZ
ALB
BGR
TUR
Mean = 30.2
TJK
UZB
CZE
EST
HRV
LVA
POL
SVK
UKR
MDA
LTU
ROM
MNE
HUN
KAZ
RUS BLR
Note: EU10+1 is the new member states of Eastern Europe and Croatia. LI is low-income, MI is middle income countries of the Community of Independent States (CIS).
Source: World Bank (2011a).

7. The importance of skills gaps (2)
Growing firms demand more skilled workers, who, in turn, contribute to growth
(Percentage distribution growing and declining firms by human capital intensity, 2005)
23.8
29.1
30.6
37.7
45.7
33.2
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Expanding firms Non-exapanding firms
High skill intensity
firms
Medium skill
intensity firms
Low skill intensity
firms
Expanding firms hire
more highly skilled
labor than firms that
are contracting
Contracting firms hire
more low-skilled labor
than firms that are
expanding
Note: The skill intensity groups are defined as follows: Low = human capital index <= M – 0.5*SD. Medium = M – 0.5*SD < human capital index <= M + 0.5*SD. High = human capital
index > M + 0.5*SD. Where human capital index is an average of the distribution of a firm’s workforce by educational levels (primary education=0, tertiary education = 3); M=
Mean, SD = Standard Deviation
Source: World Bank (2009a).

8. The importance of skills gaps (3)
8
Note: The figure shows which occupations have an excess or deficit supply of workers. The percentages reflect the net result after
comparing registered unemployment and job vacancies by occupation. A positive value indicates that the unemployment share is
higher than the vacancy share, pointing to excess supply. A negative value indicates the vacancy share is higher than the
unemployment share, pointing to unmet demand.
Skills mismatch: too few craftsmen and too many low-skilled workers
(Excess supply of labor over demand by occupation, 2006)
-25
-20
-15
-10
-5
0
5
10
15
20 Managers
Professionals
Technicians
Administrative
Salesandservice
Skilledagricultural
Craftsmen
Machineoperatorsand
assemblers
Laborers
percentagepoints

9. Measuring Skill Gaps in Ukraine
• Previous work but many unanswered questions
• Link to ongoing panel household survey
– Partnership with Institute of Labor in Bonn (IZA) and the Kiev Institute of
Sociology (KIIS)
– Sustainable in time
– Link to past information and labor market and skills accumulation history
• Comparison with OECD PIACC
– Country with high levels of literacy
– Eastern Partnership
• Partnership with private sector
– Ernst and Young survey of firms: benchmarking
– Sectoral approach

10. Feedback into the policy dialogue
• Policy dialogue difficult
• Maintain and create a cross-sectoral engagement
with little lending
• Engaging all social partners, especially directly with
the private sector and trade unions

11. Thank you
Indhira Santos
isantos@worldbank.org