By Daryna Krasnolutska and Volodymyr Verbyany

(Bloomberg) -- After years of bumper exports, Roman Pelekh
is running low of inventory: the Ukrainian workers he’s been
placing throughout eastern Europe since 2002.

That’s bad news not just for Pelekh but for Ukraine’s
economy. Growth has slowed for four straight quarters as the
worker squeeze stokes wages, triggering higher interest rates
and choking credit.

“Labor migration is one of the emerging problems for
Ukraine today,” central bank Deputy Governor Dmytro Sologub said
by email. “It may become a serious risk for both economic growth
and price stability in the coming years.”

Ukraine has helped plug a dearth of labor from Prague to
Warsaw after European Union travel freedoms and the lure of
higher pay prompted citizens from those countries to move en
masse to the bloc’s richer west.

“Foreign companies have no way out,” said Pelekh, who’s
just opened his ninth office since 2013 and can only meet a
fifth of clients’ demand for staff in areas such as
construction, agriculture and nursing. “First they were only
looking for employees with wide experience and diplomas. Now
they’re taking everyone and spend a month training them if
needed.”

Polish Wages Four Times Higher

The attraction of -- and for -- Ukrainian workers is clear:
their pay back home averages 7,100 hryvnia ($265) a month,
compared with 3,500 zloty ($1,046) in Poland. A lingering
conflict with Russian-backed insurgents, a devaluation and
persistent corruption are reasons to leave. Poland has 1.5
million registered Ukrainians and there may be another half a
million undocumented. The Czech Republic plans to double annual
Ukrainian worker quotas.

Andriy Kozlovskyy, a 37-year-old telecommunications
engineer, used his Polish ancestry to help him move to the
Baltic Sea town of Gdynia in 2014.

“The time was right when the war started and the hryvnia
plunged -- I always wanted to work abroad,” he said. “I’m far
from being a big earner, but here it takes one year to make what
I would in four back home.”

How many have gone

Official Ukrainian data show 7 percent of the ex-Soviet
republic’s workforce has left since 2015 -- the number is
probably much higher since Ukrainians now enjoy visa-free travel
inside the EU.

Twelve percent of Ukrainians have found foreign
employment or plan to soon, according to the International
Organization for Migration. The longer-term picture is also
worrying: the United Nations sees the population plunging to
36.4 million from 44.2 million by 2050.

Companies such as Oleksandr Dranov’s printing firm in
western Ukraine are feeling the pinch.
“We have many vacancies and it’s unclear how we’ll fill
them,” he said. “Young people prefer to go to Poland or Baltic
countries.”

Poland, Slovakia and the Czech Republic allow Ukrainians to
take temporary employment, usually for a few months. Ukrainians
were granted visa-free travel for tourism across the EU last
year, easing the passage for some legal workers and others
willing to work illegally. Transport links have also improved,
including a new train link between Kiev and Warsaw.

The attraction of leaving may fade, according to Pelekh,

who says wages for manual laborers in Ukraine are nearing the
level of Poland. His company also estimates most workers
eventually return home. For now, his business is swelling, with
clients popping up in Denmark and Israel.
“It’s up to the worker to chose,” he said.

--With assistance from Kateryna Choursina, Radoslav Tomek and
Dorota Bartyzel.

To contact the reporters on this story:
Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net;
Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net

Slider photo: Love in the age of visa free: a couple embraces minutes before a new express train pulls out of Kyiv's Central Station for Przemysl, Poland. (UNIAN/Vladimir Gontar)

Timothy Ash writes: And the Poles are loving it. I was there last year, and businesses were talking up the benefits of 1.2 million Ukrainians. Sad for Ukraine as it is creating skill shortages locally. Ukrainian politicians should ask themselves what are they doing to retain labor.

Posted Feb. 19, 2018