Research

Wars disrupt labor markets, yet systematic evidence on how markets for labor services operate during conflicts is almost entirely absent. Ukraine is a rare exception: despite the full-scale Russian invasion, timely data on workers and vacancies, in both stocks and flows, remain available. We use these data to document one of the largest labor supply and reallocation shocks in recent history and to estimate the impact on job matching, showing how labor markets adapt under extreme stress. The labor force shrank by about one fourth, yet vacancy filling rates and matching efficiency declined modestly. Only along the frontline and in occupied regions there is evidence of labor market shutdowns. Wage flexibility, adaptability of recruitment policies of firms, and remote working help explain the resiliency of labor outcomes. Recovering longer-term human capital losses suffered by Ukraine will require a mix of tools going well beyond labor policies and should be a priority for the reconstruction phase.

The Ukrainian labour market not only needs to be rebuilt, it needs to be rebuilt better. The unprecedented challenges imposed by the reconstruction can only be faced by a labour market that promotes participation and eases the reallocation of workers across jobs. This was not the case for the labour market in Ukraine before the bloody Russian invasion. Reconstruction will therefore require a mix of emergency measures to deal with the legacies of the war and structural reforms to address pre-existing inefficiencies of the labour market. In this chapter, we illustrate the challenges in light of experience of other European countries that have gone through military conflicts in the recent past and propose strategies for action.