THE EFFECTS OF MIGRATION PROCESSES ON THE NATIONAL ECONOMY
Abstract
In this paper, we present the results of our research on effects of external labor migration of Ukrainians on the national economy via real wages growth. For the purpose of our analysis, we initially considered the period from 2008 to 2024, but as statistical data for the period after 2022 are not complete, we limited our timeframe to the period up to 2022. Our research shows, that over the considered time the real wages in Ukraine were growing faster than the labor productivity. During the same time, the flow of Ukrainian labor migrants grew substantially. We assumed that the labor migration affects the real wages making them grow faster than the labor productivity. Using the Derzhstat (State Statistics Service of Ukraine) and Eurostat data, we calculated the labor migration coefficient as a ratio of total number of Ukrainians holding the EU work permits at the end of each year to the total workforce of Ukraine (aged from 15 to 70 years). Over that period the calculated labor migration coefficient grew substantially - from 1,28% to 5,18%. The whole analyzed time period was divided into 3 sub-periods: from 2008 to 2014 - when the Russian invasion to Ukraine started and some parts of Ukraine were occupied, from 2014 to 2018 – when the EU allowed visa-free travel for Ukrainians, and from 2018 to 2022 – when the full-scale Russian war against Ukraine began. For the each of the above sub-periods we observed that the relationship between the labor migration coefficient and the real wage looked as a convex function. Therefore, we assumed that the relationship between the migration coefficient and real wage could be described by an exponential function. Because, since 2014 a certain part of Ukrainians residing on Russian-occupied territories were excluded from the total Ukrainian labor force, the demographic statistics before and after 2014 are not completely compatible. Therefore, for model parameters estimation we used the post-2014 data. We estimated the parameters of a log-linear model with the natural logarithm of real wage as a dependent variable and the coefficient of the labor migration as an independent variable. The value and significance of the estimated model parameters indicate a strong positive exponential relationship between the migration coefficient and the real wage. The estimates suggest that under the conditions of high external labor migration in Ukraine the 10% growth in migration coefficient is associated with the 13,4% growth in real wages, and this relationship is not linear - as the migration coefficient grows in absolute value, the marginal increase of the real wage also grows.
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