Oleksii Miroshnychenko, President, Confederation of Employers of Ukraine

Ignoring the inclusive labour market will lead to a higher pensionable age

Ukraine has achieved a record employment level among persons with disabilities: the number of employed has increased by 14% over two years. It sounds intriguing but the real situation is completely opposite. Only 18% of able-bodied persons with disabilities have a job, that being one of the lowest figures in Europe.

Analyzing the labour market situation, we realize that the labour market gap cannot be overcome without hundreds of thousands of employees with disabilities. We realize that persons with disabilities, along with women, pensioners and youth, is one of the most promising groups for overcoming the shortage in the labour market.

Ukraine will face a choice in a few years: give jobs to its citizens as much as possible, or invite foreigners. We are sure that the decision to open the country to low-skilled employees from Asia or Africa is premature.

That is why the first attempt to attract low-skilled employees whose native country is 6,000 km from Ukraine spectacularly failed. Clearly, arrival in Ukraine for work is a one-way journey for many of them, and they be followed by their families.

Do we want that? A way out for Ukraine is to use all the available labour potential, in particular the labour of able-bodied persons with disabilities. The number of this group is 2 million people at least but less than 500 thousand are employed.

The second important reason for the need to engage persons with disabilities in the labour market is very unpopular. It’s a deficit of the Pension Fund resources, the need to raise pensionable age, and reduction of social benefits.

One low-skilled employee per one pensioner is an economically unprofitable situation for the pay-as-you-go pension system. It leads either to a decrease of the pension rate or to a radical increase in the single social security tax.

The Pension Fund receives less contributions than necessary to pay money in the pay-as-you-go system. In 2024, the Pension Fund paid UAH 821.5 billion; 33% of them, UAH 274.7 billion, came from the state budget.

The state budget finances the Fund partially from foreign borrowings. Our foreign partners have been proposing, as long as 14 years, to find a balance by increasing pensionable age and reducing social expenditures. Their key argument is as follows: they cut down expenditures amid a deficit while Ukraine, on the contrary, asks for financial aid without changing its approach to social policy.

The labour market gap, the stronger disbalance in the Pension Fund, and the threat of international aid cutdown are three reasons whey Ukraine must create conditions and incentives for employment, in particular, of persons with disabilities. The labour market must become inclusive and open to all those willing to work officially.

The same task faces the British government that is looking for ways to reduce social payments to persons with disabilities. Amount of these payments will reach 100 billion pounds by 2030, which will be greater than the country’s defence budget.

The British government is going to present a programme of reforming the system of support for persons with disabilities soon. One of steps is cutdown of benefits and payments. The process is painful, but it will allow engaging 450 thousand persons with disabilities to the labour market.

Britain thoroughly examines the experience of the Netherlands that has achieved a record-breaking result: the employment level in the country has reached 82.3%, with another 3.2% of the population actively looking for a job. The Netherlands’ experience attracts not only London but also Brussels – the Belgian government’s intentions have caused a tidal wave of protests and strikes.

If we compare employment levels in the Netherlands (82.3%), Great Britain (74.95%) and Ukraine (below 40%), the conclusion will be obvious. The sooner we commence reforms, the less painful inactivity-caused consequences will be.

The Dutch model will be interesting to Ukraine as well. The main postulate: it is much easier to retain a person in a job than to provide people benefits and then take them away.

Research by the Organization for Economic Co-operation and Development shows that in case of a six-month break in employment people stop working at all, and likelihood of their return to the labour market is swiftly falling. Any state policy missing these first six months will fail.

The Netherlands has obliged an employer and an low-skilled employee with disability to draw up a plan of the latter’s retention at work. The plan may include a position change and a radical reduction of the working day, even to two hours per day.

This approach is being implemented in Japan for adaptation of persons with disabilities in the labour market. In some cases, duration of the working week is only 15 minutes.

If an low-skilled employee and an employer in the Netherlands haven’t reached agreement concerning engagement in work after medical treatment or rehabilitation, such a low-skilled employee doesn’t receive financial aid. It has strongly affected the employment level of those having disabilities.

Another incentive for persons with disabilities to return to the labour market consists of an extremely localized system of their social support. Funds for adaptation were “downed” from the national level to the level of communities which provide persons with disabilities with things necessary to resume their working activity. A similar system operates in Norway.

As a flip side of the Dutch system, quite many companies (77%) are unwilling to hire persons with disabilities. Some tools are being created in Amsterdam to convince them of reasonability of using “hidden” opportunities.

For example, to avoid long privileged leaves of persons with disabilities, companies can reduce the working day, which has a weaker adverse impact on business processes. In some cases, they implement lifestyle intervention programmes, accustoming the people to healthy nutrition and sports.

The Dutch model posed a challenge to Great Britain where a person with disability is given guarantees, and only then measures are taken to get them back to the labour market. Such an approach is adopted in Ukraine, and the examples described above will be a challenge to us.

The models of the Netherlands and Ukraine are extremely contrasting.

As the first difference, the Netherlands rests responsibility on both an employer and a person with disability, so they must find a way out together if the person is unable to work. In Ukraine, a “simple” formula is used: either meet a quota or pay a fine.

The second difference is so-called state paternalism when all social expenses are directed to a person from Kyiv whereas local authorities or territorial communities are deprived of financial capability for creating an inclusive space in the community.

In Ukraine, these expenses are imposed on a family or friends because local communities cannot settle the issue. This pyramid needs to be turned upside down, and it must be realized that not only responsibility must be rested on 1,470 communities but also capabilities must be provided to them.

As the third difference, job placement of persons with disabilities in Ukraine is an obligation of business. Up to the end of 2025, the state will not be obliged to meet the quota for hiring of such people. At least, there are no fines for failure to meet it.

In the Republic of Korea, meanwhile, the share of persons with disabilities among officials is 3.57% versus 3.45% in the private sector. Many such examples can be found in reviews of labour market inclusivity enhancement practices.

The main difference between the models adopted in Ukraine, Great Britain and the Netherlands consists of existing stereotypes concerning persons with disabilities. Our experience shows that the status often becomes a serious obstacle for persons with disabilities in entering the labour market, and dooms them to full economic dependence from the state. As a result, their pension is maximum 3 thousand hryvnias per month in most cases.

A change in the idea of persons with disabilities will unlock their potential and launch colossal changes in the labour market. The possibility for persons with disabilities to have a decent job is a foundation for stability of their families and communities. Research by the Confederation of Employers of Ukraine shows that employment of persons with disabilities gives them not only economic independence but also psychological resilience.

A veteran who came back from the front with disability said in his interview to the Razom project: “I want to set the example to my son. Life is not over after disability, and we are able to change it for better”. Such a discovery can be made for themselves by hundreds of thousands of unemployed persons with disabilities and their relatives.

The HR directors surveyed by us noted that staff turnover among persons with disabilities is twice lower than the average figure at enterprises. However, many managers have questions as to how to build healthy relations in a team that can be joined by persons with disabilities.

Enterprise managers or HR partners can draft internal policies on adaptation of low-skilled employees with disabilities and take necessary training. How to do that? The Confederation of Employers of Ukraine is preparing an answer to this question.

Source: Ekonomichna Pravda