Andrii Haidutskyi: "Ukraine needs millions of new taxpayers"

The reduction of international financial aid once again brings to the fore the question of where to get money for the military and civilians, to pay off debts and restore infrastructure. Before the war, Ukraine collected the lion's share of budget revenues through taxes on people and businesses. So, if we want to increase budget revenues, we need more people, more entrepreneurs. But what if the emigration of Ukrainians and the transfer of Ukrainian business abroad do not stop?

ZN.UA continues a series of interviews about Ukraine's biggest post-war problem with migration policy expert Andrii Hayudkyi. At one time, he studied the world's best experience of many countries both in attracting foreign migrants and in implementing programs to return their migrants. In addition, he also advised the International Organization for Migration (IOM), the Asian Development Bank and the National Bank of Moldova on the development of programs to stimulate the attraction of remittances from migrants and the diaspora.

Earlier we talked about the return of Ukrainian migrants, and now – about the need to attract foreign labor.

— Mr. Andrii, the latest Eurostat data show that at the end of 2023, the number of Ukrainian refugees to the European Union continues to grow. Why, despite the conditional, of course, but reduction of security risks, the emigration of Ukrainians continues?

— The departure of Ukrainians abroad, unfortunately, has never stopped. There was emigration even before the beginning of the occupation of Crimea and part of Donbas. According to Opendatabot, 1.4 million Ukrainians left and did not return during 2011–2013. In 2014–2021, an additional 1.3 million Ukrainians left. Regular polls by the Gallup agency in 2010–2020 showed that, depending on the year, 21–25% of the population of Ukraine wanted to go abroad. In 2021, this share of Ukrainians increased to a record 35%. That is why such a mass emigration of Ukrainians took place in 2022. In fact, the war acted as a trigger and embodied the desire of a part of the population to go abroad. The key goal of emigration is traditionally the desire for self-realization and the desire to receive higher incomes. This applies not only to Ukrainians, but also to other nations. For example, in the European Union, 17% of the population wants to change their country of residence. In Poland, population emigration does not stop, but on the contrary, it increases. According to Eurostat, for the years 2014–2021, even more people emigrated from Poland than from Ukraine – 1.7 million people. According to the Organization for Economic Cooperation and Development, Poles are among the leaders in emigration to most of the Scandinavian countries, and in the Netherlands and Norway they already make up about 15% of all foreigners.

— Why is migration to the European Union increasing, because people there live much better than in Ukraine?

— First: a person has long gone beyond the boundaries of his country. Perhaps it was best described by Pulitzer Prize winner Thomas Friedman: "If in the 19th century a person thought about the role of his country in the world, in the 20th century he thought about the role of his company in the world, then in the 21st century a person thinks about what his personal place in the world". The concept of "country" has long since fallen out of the context of human development. A person first of all thinks about himself, about his own development, about security, etc. In the modern world, "person", "company", "country" (that is, the government) are different stakeholders, not a single whole. They will interact with each other as long as it is beneficial for both parties. Unfortunately, the key word here is "beneficial". After all, if "person", "business", "country" were a single entity, would representatives of Polish business block Ukrainian borders, because the Polish government and population are against this? Would the Hungarian authorities block support for Ukraine from the European Union, because both local business and the population support us? According to the Organisation for Economic Co-operation and Development (OECD), Ukrainians make up almost 32% of all foreigners in Hungary, and thousands of businesses operate there thanks to Ukrainian labor.

The second thing that will affect the acceleration of migration in the world is the digitalization of economies and the transition to Web 3.0 and the development of metauniverses. With the transition to decentralized data processing, thanks to the development of decentralized companies (DAOs), decentralized finance (DeFi), artificial intelligence and AR/VR technologies, many people will be able to work from any part of the world without being tied to an office.

By 2030, 30% of the world's Gross domestic product (GDP) will be generated by digital technologies, which means that countries will struggle to keep hundreds of millions of people and their families migrating from one country to another every year. In the European Union, many countries already offer special visas for "digital nomads".

Third, and of greatest concern to many, is that climate change is beginning to significantly affect the displacement of hundreds of millions of people. Climate change will be the biggest trigger for population migration in the world. In September 2023, even the President of the United States of America, Joe Biden, said that climate change is a greater threat than nuclear war. According to the World Economic Forum, 66% of world leaders are most concerned about this problem in 2024. And it is actually so. Let's compare: in 2022, almost 8 million Ukrainians moved abroad due to the war, and another 6 million moved within Ukraine. More than 33 million people were displaced in Pakistan due to natural disasters in 2022. Dozens of countries already experience such climate "surges" every year. This will increase migration. But, as before, it will be mainly economic in nature.

— What economic threats does increased migration pose for countries, in particular, for Ukraine?

— Now I'm talking about threats to the government, because society has empowered it to maintain the economy and infrastructure in a functioning state.

The first threat is an increase in the time it takes to fill vacancies at enterprises. Due to emigration and aging of labor resources, companies cannot fill vacancies for three to six months, depending on the sector of the economy. This affects both the terms of order fulfillment and the income of companies.

As a result, a second threat arises – a forced increase in salaries for staff, and much higher than the inflation rate. Salaries are a key cost item for a business, and if they are unpredictable, the business will start thinking about automation or moving to another country. In 2023, inflation in Ukraine was only 5.1%, and salaries increased by almost 23%. For comparison, in Germany, inflation was 5.9%, and wages increased by only 6%. The authorities should think about how to ensure the labor supply in order to minimize the manifestations of the first two threats and not to force businesses to think about the "emigration" of production. And if the business cannot quickly find a Ukrainian citizen at an acceptable cost, then it must be able to quickly attract a foreigner.

If this is not done, we will get the third threat, namely the automation of production. Yes, it is now fashionable to talk about automation and digitization. But for the authorities, this is a real problem, because automation leads to a reduction in taxes and payments. For example, there were ten employees at the enterprise, and after automation there were five of them. As a result, the budget will not receive taxes, in particular, personal income tax and the single social contribution, for five people dismissed from their positions.

Large-scale automation and robotics await Ukraine, because business will solve the problem of lack of personnel. Today, there are less than ten industrial robots per 10,000 workers in Ukraine. According to the International Federation of Robotics (IFR), by the beginning of 2023, there will be more than 400 industrial robots per 10,000 workers in Germany, 190 in the Czech Republic, and almost 70 in Poland. But this is not the biggest economic problem for the Ukrainian authorities, especially in the conditions of war.

— And then what is the biggest problem?

— Now the biggest problem is the lack of people, or to be more precise, the lack of taxpayers. I think it was best described by President Volodymyr Zelenskyy during a press conference in December 2023: society needs to understand that to support our soldiers, we need people who pay taxes. He repeated this in Estonia in January 2024, clarifying that if a person does not fight, then he should work and pay taxes, which support the Armed Forces of Ukraine. After all, it is people (and not enterprises) who are the largest taxpayers in the country.

— The president calls on people to return, but the statistics with which we started the conversation say that Ukrainians do not hear him.

— In economics, there is no such thing as "Ukrainian" or "Pole". Instead, there are employees, employers and investors... All together they are taxpayers. As we can see, it is increasingly difficult to fill the state budget with funds, international aid in the form of money is decreasing, and international politicians are already declaring that Ukraine will not be provided with further allocation of funds and the provision of bank checks. In fact, we are being prepared for the fact that the support will be in the form of weapons, and the funds that Ukraine will receive will be used mainly to repay previously taken loans. Therefore, there are only two ways to fill the budget of Ukraine: either to raise taxes, or to increase the number of taxpayers.

In our realities, when people and businesses suffer huge losses as a result of the war, and the costs of enterprises for personnel salaries continue to grow, the only effective way to increase budget revenues is to increase the number of taxpayers. Ukraine needs millions of new taxpayers. If Ukrainians do not want to return, Ukraine should promote the attraction of foreigners. The authorities of Poland and Germany do the same, since they have similar problems with maintaining a growing share of pensioners and increasing expenses for "social welfare" and security. And war and reconstruction, which must take place in parallel, fell to the fate of Ukraine. At the expense of Ukrainians, it is no longer possible to fill the budget with income to the required level. From the first year of independence, Israel began to actively attract foreigners, realizing that in the war for the country's existence, both people and money are not enough. In Israel during the war in the first years of independence, the net increase of foreigners was more than 100 thousand people every year. In Germany, from the first year of liberation from Nazism, the authorities tried to attract eastern and ethnic Germans to rebuild the country. But she quickly realized the inadequacy of such actions and began to conclude agreements with the governments of Italy, Spain, Turkey, Morocco, and Yugoslavia on the involvement of guest workers. In the 1950s and 1960s, more than 12 million people were recruited to be able to collect taxes and carry out reconstruction.

— How many immigrants does Ukraine need to attract for economic growth? For example, according to the estimate of  the Ministry for Development of Economy and Trade of Ukraine, it should be 4.5 million people over the next ten years.

— I think the Ministry for Development of Economy and Trade of Ukraine had in mind new labor immigrants who will work for employers for an average of 12 months. But some will come and stay, and some will stay for a week or a month and return to their country or go further. Yes, it is a real problem in the eastern EU-10 countries. Ukrainians, Uzbeks and Azerbaijanis come. They work for a week or a month and then move on to Germany or the Netherlands. Depending on the field of activity, 10–50% of working personnel are dismissed early, look for better working conditions, create their own micro-businesses, become self-employed, etc.

For example, in Poland, in 2021, almost a million foreigners received temporary residence permits in the country, and only 504,000 received work permits. That is, people come and go. Therefore, we need to be concerned not with the fact that foreigners who are strangers to us may come, but with whether at least some of them will stay in Ukraine for some time, whether they will create a consumer effect, rent housing, pay taxes... That is, in other words, the 4.5 million foreigners announced by the Ministry for Development of Economy and Trade of Ukraine are a burden on the employer system. But in order to reach this figure, it is necessary to attract significantly more foreigners. Many of them will also bring their families with them. That is, the load on consulates, the migration service, the police, and recruiters will be two or three times greater.

— From which countries can we attract foreigners?

— Employers themselves must determine from which countries they need workers, and they must bear responsibility for them. The authorities should not interfere there, it is only necessary to monitor the balance so that the country does not turn into a monocultural "Chinatown". There are about a hundred countries in the world where the average salary is lower than in Ukraine, so there is plenty to look for. Of course, business does not really understand from which countries to invite foreign labor, so recruiters, as well as immigration lawyers who have work experience, including abroad, will come in handy. If we look at Poland, where the recruiting services market is very competitive specifically for attracting foreigners, the top 5 nationalities (excluding Ukrainians) are: Georgians, Indians, Vietnamese, Moldovans and Chinese. In the Czech Republic, Slovaks, Vietnamese, Romanians and Indians are most often employed. Romania attracts the most foreign workers such as Turks, Moldovans, Nepalese, Hindus, and Germans. Of course, employers in Ukraine will not be able to attract immigrants from aggressor countries and their accomplices, i.e. Russians, Belarusians, Iranians, etc. But it is worth imagining that many foreigners from the European Union will not come to us either.

— Does Ukraine have a chance to attract Poles in the same way as the Czech Republic attracts Slovaks?

—  Of course. But their number will be small due to low salaries in Ukraine. And we need millions of cheap workers. Probably the best example here is the United Arab Emirates. In the country, almost 90% of the population are immigrants. It is worth noting that only 5% of them come from developed countries. In fact, the United Arab Emirates that you see in the pictures with skyscrapers was built by the hands of immigrants from India, Pakistan, the Philippines, Bangladesh and Egypt. These five countries account for almost 60% of all foreigners. Even in the United States of America, where more than 45 million foreigners work, less than 10% are immigrants from developed countries. So let's have no illusions. If we want to attract 100,000 Poles to Ukraine, then it is necessary for more than a million workers from poorer countries to come, who will be engaged in hard work, in the so-called 3-D industries: dirty, difficult, dangerous, where hard work prevails. Poles, like Ukrainians, will work in managerial positions, as well as in the service sector. The future prosperity of Ukrainians and the success of Ukrainian business will depend on the ability to attract foreign low-skilled labor. We can see all this even in Germany, where there is a business that already tells recruiters: "I don't want a German employee, I want a Ukrainian one," because they felt the benefits of working with foreigners.

— So, we will also have to fight with other countries for migrants. Is Ukraine competitive in such a struggle?

— In marketing, there is such a concept as time-to-market, that is, how quickly a product or service can enter the market. In our case, it is important how quickly the employer can bring a foreign worker. In Poland, it takes one or two days to bring a Moldovan, because after the interview, he arrives, starts working, and the legal process of employment starts in parallel. In order to bring a Moldovan to Ukraine, the employer is forced to spend up to 20-30 days, because the entire employment permit process must be completed while the future employee is in Moldova. Such restrictions significantly reduce our attractiveness for existing businesses and foreign investors who would like to locate production in Ukraine. And this despite the fact that we, like Poland, are "visa-free" with Moldova. What can we say about foreigners from countries with a visa regime... Ukraine needs to very quickly and significantly liberalize the conditions of employment of foreigners, in particular from "visa-free" countries. Then employers will be able to fill vacancies faster, and the government will start receiving taxes from new taxpayers faster.

— Do we need foreigners only in working professions?

— No, we need foreigners of all specialties and with different levels of wealth. After all, other countries "hunt" for all groups of Ukrainians, not just builders or locksmiths. For example, in Canada, the immigration plan for 2024 includes attracting 485,000 immigrants from 13 different socio-economic groups. It even separately states the need to recruit 5,500 nurses and 2,700 agricultural specialists. If we summarize Ukraine's needs for foreigners, then 60–70% of people should be hired personnel, 10–15% of emigrants should be entrepreneurs-investors, 10 – 15% of people should be self-employed (without the right to hold jobs), in particular IT professionals ( in the world they are more widely called "digital nomads"), and the rest are foreign students. It is important to develop programs for immigrant entrepreneurs based on the principle of Golden Visa Programs: "residency in exchange for investment", "citizenship in exchange for investment"...

Let's remember that we are expecting large-scale automation of existing productions, and accordingly, an increase in the workforce. Will people dismissed from their positions become entrepreneurs? Unfortunately, the statistics in this matter are not very optimistic. Naturally, only 5–15% of the population can be entrepreneurs. This is how the world works. After all, if everyone could be an entrepreneur, then who would work? Accordingly, Ukraine needs to attract thousands of new foreign investors every year, who will offer jobs for Ukrainians who will be subject to reductions. That is, the only cure for the authorities against the threat of automation at existing enterprises is the creation of new enterprises.

It is also necessary to separately stimulate the involvement of foreign students. After all, due to the departure of almost one million children in 2022-2023, the education system will lack future students. It is not clear why the Ministry of Education and Science of Ukraine is silent about this? And the problem is not the war. By the beginning of 2022, only 80,000 foreigners were studying in Ukraine, and about 800,000 in Canada, that is, ten times more. And this despite the fact that at the beginning of the war in both countries the population and the number of universities were similar. Students are the most promising category of foreigners: future employees, entrepreneurs, innovators. Their involvement should be a priority of the authorities.

— Looking at the data on the attraction of foreigners to neighboring countries, I understand that the majority of them will be from Asian countries. But most of them have a visa regime in Ukraine. Obviously, the first priority should be changes in this direction.

— In today's realities, the only advantage of Ukraine is to give the employer the opportunity to attract foreigners very quickly, if he cannot find Ukrainians. There are several groups of foreign workers here.

The first. If these are citizens from a "visa-free" country, the employer must be able to invite them and simultaneously start the procedure for obtaining a work permit.

The second. These are citizens from the "visa" country, but they have a valid visa from the countries of the European Union/Schengen zone, the United States of America and Canada. It should also be possible for them to come to Ukraine visa-free to work at the invitation of Chukhez and start processing legalization documents in Ukraine at the same time. It makes no sense to issue them a visa at the Ukrainian consulate if they have already passed the "compliance" and security control of the consulate of another developed country. This approach is already practiced in other countries.

The third. Citizens from the "visa" country, but who once had and expired Ukrainian visa. It is also potentially inexpensive labor force, former graduates of Ukrainian universities. Their engagement should be simplified and they should move in a separate priority queue at the consulates.

The fourth. Inviting other citizens from "visa" countries through revision of the terms of their involvement, taking into account the needs of employers.

— Is Ukrainian society ready to accept people from other countries?

— Our society is not ready to accept immigrants. I think that both Polish and German societies are largely still not ready for this. No one is ready for this until you pick up a calculator and explain why we need foreign labor. Foreigners are most needed by businesses as labor force, and by central and local authorities as new taxpayers. Therefore, the government should talk about it with the society. In Germany, the country's economy minister, Robert Habek, speaks most about this to society. And that's understandable. In 2023, the foregone income of German companies due to the 2 million unfilled vacancies amounted to almost 100 billion euros. Because of this, the federal and local budgets of Germany, in turn, received about 50 billion euros in taxes and fees. Uncollected taxes mean the impossibility of raising salaries for civil servants and military personnel, pensions for retirees, and social benefits for vulnerable sections of the population. If we don't attract foreigners, who will pay the taxes and support the "aging" nation? The German and Polish authorities talk a lot about this with their society. We have to pass this stage in the same way that society changed from horses to cars a hundred years ago and from notebooks to computers 50 years ago. Then it was also painful, because the population did not have a special need for it. But this is the only way to evolution and improvement of society's well-being.

— What will happen if we do not change anything at all in the current migration policy? Will foreigners be able to come and work in Ukraine in this case?

— A large number of migrants will come to Ukraine in any case, because there is a demand for it from employers, and we will also be told about it in the European Union. But if nothing is done, a significant part of them will be of low economic "quality", so to speak. After all, in simple words, what is migration? This is a "tsunami" that is moving towards Ukraine, and, as I have already said, the main reason for migration is climate change. And what is migration policy? This is a "dam" that stands in the way of this migration. And how the authorities will regulate this "dam" will depend on whether immigrants will bring synergy of economic growth and prosperity to Ukraine, as well as multibillion-dollar taxes and fees through their activities in the country. And here the most successful experience is the experience of Canada and the  United Arab Emirates (UAE) in attracting and regulating the demand for foreign labor. Or, on the contrary, we will follow the example of the United States of America, which has the largest number (10.5 million) and share (22%) of illegal migrants in the world. But Ukraine is not the United States of America, we cannot print billions of dollars every year to fix the economic problems caused by illegal migration. In 2023 alone, the United States of America spent $25 billion on immigration border security and about $10 billion on refugee work. More than 20 billion dollars is needed for the "wall" project on the border with Mexico, the length of which is 3.1 thousand kilometers. The Ukrainian authorities do not have and will not have money for these things, and the wall will have to be built from completely different neighbors, with whose border is more than 3.3 thousand kilometers. Therefore, the issue of migration policy specifically in terms of security requires a separate dialogue with society.

 

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