Ukraine’s Recovery Has a Labor Problem. Productivity Issue Is Urgent

For decades, discussions about economic growth have focused on investment, exports, and industrial capacity. However, in Ukraine, one factor may be even more decisive: people. It is demographic challenges that limit the growth of an economy that is preparing for reconstruction. To address this problem, a study "Workforce Demand In Ukraine Through 2035” was prepared with the support of the Friedrich-Ebert-Stiftung. The authors are Vadym Yemets, Roman Kushnir, Volodymyr Vlasiuk, and Serhii Povazhniuk.

Since 2022, Ukraine’s population has declined by nearly 1.5 million people, falling to an estimated 39.5 million as of January 2026. Roughly 29.5 million people reside in government-controlled territory, around 3 million remain in temporarily occupied areas, and approximately 7 million Ukrainians are currently abroad.

The most alarming trend is the shrinking pool of working-age citizens. In government-controlled territory, the working-age population has fallen by 20% since 2022—from 23.5 million to just 18.9 million people.

While employment has partially recovered since then, the recovery has been uneven. Public administration added 1.6 million workers, largely reflecting mobilization and wartime governance needs. The energy sector also expanded modestly.

Meanwhile, sectors that traditionally generate economic value experienced substantial losses:

•        Agriculture lost 1.4 million workers;

•        Trade lost 1 million;

•        Manufacturing lost more than half a million.

In effect, labor has shifted away from productive sectors of the real economy toward activities driven by wartime necessities. This redistribution may have been unavoidable during the conflict. The challenge now is how to reverse it during reconstruction. The study outlines two possible trajectories for the next decade.

The first is an inertial scenario, where Ukraine largely preserves its current labor-intensive economic model. Under this path, the economy would require approximately 16.9 million workers by 2035—creating an additional labor demand of 4.7 million people compared with employment levels in 2025.

The second is an investment-driven scenario, built on large-scale modernization of industry, transport, and energy infrastructure. In this case, labor productivity would increase by 4–5% annually.

Under the investment scenario, total labor demand in 2035 would reach only 13.4 million workers, leaving a staffing gap of just 1.2 million people—almost four times smaller than under the inertial path.

The message is clear: Ukraine’s economic future may depend less on finding millions of additional workers and more on enabling each worker to produce more value.

Read the full publication here:

t3://file?uid=1241