GENEVA (Reuters)—Ukraine, among Europe's largest countries and potentially one of its richest, has sunk into a deep economic crisis that has created a vast army of unemployed, the International Labor Organization (ILO) said Tuesday.
The crisis, sparked by failure to tackle key problems of governance since Ukraine became independent on the breakup of the old Soviet Union in 1991, has also led to population decline and a huge drop in living standards, according to an ILO report.
“The majority of the population is living in severe poverty,” said ILO economist Guy Standing, joint author of the report, “Worker Insecurity in Ukrainian Industry,” which was based on detailed surveys in the country last year.
“If Ukraine were not in Europe, it would be rightly called a developing country,” he told a news conference.
Monthly income per head had dropped in real terms from $37 in 1998 to $25 in 1999, and since 1991 the overall population had shrunk from 52 million to under 50 million as life expectancy for both men and women had declined sharply and suicide soared.
Standing, a leading specialist on the labor situation in former Soviet states, said that although official figures showed an unemployment rate of only 5 percent of the 23 million workforce the real figure was very much higher.
According to the report, industrial firms were operating at less than 44 percent capacity, down from 66 percent in 1995 in an unprecedented decline putting the level lower than in any industrialized economy.
It said more than 18 percent of all industrial workers in the country—which is looking to eventual membership of the European Union—were on unpaid leave, a device which saves management from paying severance benefits.
More than 20 percent who went regularly to their workplaces were on short-time, but most of them received no pay. Four out of five factories covered in the report had not been paying contractual wages, sometimes for 20 weeks on end.
Women, traditionally strong in the old Soviet labor force, still formally held nearly 50 percent of industrial jobs.
But the study found that 12 percent were on long-term maternity leave, even though the country's fertility rate had also plunged with the crisis—supporting, it said, the view that such leave was a way of laying off women workers.
“Taking account of all forms of visible surplus labor, about one third of all workers are laid-off at any time,” it said, “making a mockery of the official rate of registered unemployment.”
Unless a major effort were made to restructure employment and acknowledge the size of the jobless problem, overall economic reform would go nowhere and a huge labor market crisis would be inevitable sooner or later, said Standing.
But he said that with a new approach by the government and international financial institutions Ukraine, the third largest recipient of aid from the United States, could emerge from the current situation “within a few years.”
“It would be quite wrong to say Ukraine is without hope,” he told the news conference. “It has vast natural resources, an educated work force and a potentially dynamic economy with a strategically important position in Europe.”