Ever since Ukraine became independent from the Soviet Union 27 years ago, the country has been struggling to provide sufficient employment to improve the living conditions of its citizens. The unresolved military conflict in Eastern Ukraine has aggravated the situation as it lead to a sharp decline of Gross Domestic Product in 2014 and 15 (-16%) from which the country is only slowly recovering. The average mothly wage is at about 200 USD, the pension 70 USD. The difficult economic and political situation has been pushing Ukrainians out of the country in droves—many of the educated and young went in quest for better living and work opportunities to Russia, Poland, Italy, Spain or Germany. The population is around 45 million, with an estimated 5.8 million Ukranians living abroad—the extent of brain-drain would be detrimental even to stronger economies than the Ukrainian.

Employment indicators have worsened in recent years, disproportionally more for youth, women, and for those residing in rural areas. Traditional labour market indicators like unemployment rates (between 9 and 10%) do not reflect well the situation. Unemployment rates are artificially deflated by a high proportion of NEET (not in education, employment, or training) among school leavers (almost 30%). The traditional indicators also cannot cover a high perentage of informal employment and underdeclared work. An ILO survey from 2013 shows that 57% of young workers are informally employed. A further big challenge is the skill mismatch. A recent ILO School to Work Transition Survey shows that 37 % of young workers work in occupations that do not match their qualification with the large majority being overqualified. A recent challenge is the lack of skilled labour in certain secors caused by migration and an aging society. The employers in Ukraine are already signalling that this development is becoming a constraint for doing business in sectors like manufacturing.

In view of the complex labour market situation, the new ILO program funded by Denmark goes for an integrated approach based on three pillars. The program will modernize the services of the Ukrainian public employment services enabling them to offer more effective and inclusive active labour market policies. A strong skills component aims at closing the skills mismatch by better alligning the skills of new labour market entrants with the demand from the private sector. Finally, the program will support social dialogue mechanisms at the local and central level concerning critical issues such as informal employment, wages, or gender discrimination.

The new five year program is funded by the Danish Neighbourhood Programme which is Denmark’s bilateral program for EU’s neighbouring countries in the East. The new edition of this program (2017 to 21) exclusively focuses on Ukraine and Georgia and sets out two thematic objectives being the promotion of human rights and democracy, and strenthening sustainable and inclusive economic development. Based on ILO’s good track record as a specialized agency on labour market and social dialogue issues with a strong presence in Ukraine, the Danish Government chose ILO as an implementing partner for the programme with a budget of 8.6 Mio USD.