The Bottom of the Consumer’s Basket
Why is Ukraine’s labor potential so poorly utilized?
It is time to change our attitude to the functioning and reproduction of labor manpower, which is still formed according to the surplus principle, as the end result of production. “It is a socialist approach to the concept of manpower value which, in the context of market reform, no longer meets the current requirements,” said Hryhory Osovy, First Deputy Chairman of the Federation of Ukrainian Trade Unions, addressing a workshop seminar in Kyiv.
Speaking about recent positive labor market trends, he reminded those present that a few years ago an average of fifteen individuals competed for one job in Ukraine. Today this number has dropped to five, although it takes nine months to find a job, a rather long time. Unions are worried by the tangible reduction in hired labor manpower and the employment rate throughout the years of structural changes and economic reforms. Whereas ten years ago the Ukrainian labor market numbered over 25 million hired workers, today there are only 14.6 million.
Another problem is the low level of manpower usage in Ukraine. Payroll statistics show that slightly more than 50% of those employed work a full day. This situation does not exist in any other post-Soviet country. The unions believe that the employer must assume economic responsibility for such incomplete utilization of the labor potential. Here a mechanism similar to land lease can be used: if you lease a plot and fail to put it to good use, you’re out.
The workshop seminar also noted the reduction in manpower quality. A man entering production after nine months of looking for a job is invariably disqualified. On the other hand, it is very difficult to get back people who leave production for other sectors of the economy.
Manpower quality also has physiological characteristics. According to WHO’s standards, an adult has to consume at least 2,800 kilocalories every 24 hours. Ukraine’s consumer basket contains 2,564 kCals, meaning that at the living wage level an adult is noticeably undernourished. A new consumer basket structure is being worked out in Ukraine, taking into account the new realities; medicine has actually been placed on a paid basis, and rent is not free either. These factors must be added to the manpower value. The workshop seminar stressed that a worker must also support disabled members of his family. That is why the so-called family burden ratio is added to the value of manpower all over the world.
Workshop participants heard the warning that high labor efficiency and quality cannot be expected by including in the value of manpower absolutely insufficient resources for its reproduction. “We can’t count on Ukrainian manpower’s competitiveness unless we change our attitude to its quality,” Mr. Osovy warned, adding that domestic business is still using labor potential created under the Soviets. This resource is not inexhaustible; latter-day technologies require a different level of training and qualifications. Statistics indicate that every Ukrainian employee undergoes retraining/refresher courses once every 12 years on average. This obviously is not enough to keep pace with production needs (in the West the rate is once every three years).
To resolve this problem, following talks held between unions and the government, a resolution was issued whereby employers who pay 2% of their payroll funds for retraining and refresher courses have a right to refer such expenses to total costs. An economic mechanism has thus been created to stimulate and enhance the competitiveness of individual enterprises and the economy as a whole. Yet life does not stand still and the workshop seminar discussed the possibility of increasing such payments to 3-4%.
The discrepancy between working conditions and manpower reproduction capacities results in the disablement of 80,000 Ukrainians every year. Today, their numbers total 2.5 million. Therefore, the labor resource issue is becoming more acute. One of the unions’ main initiatives was a proposal to work out a medium-term national labor potential development and preservation program.
