ECB sees Ukraine refugees lifting workforce by up to 1.3m

Refugees fleeing the war in Ukraine could end up boosting the euro area’s active labor force by up to 1.3 million people, the European Central Bank predicts.

“Back-of-an-envelope” calculations point to an jump of 0.2% to 0.8% over the medium term, the institution said in an economic bulletin published Monday — corresponding to between 0.3 and 1.3 million workers.

“The increase in labor supply that results from the influx of Ukrainian refugees could slightly ease the tightness observed in the euro area labor market,” researcher Vasco Botelho wrote. “If they can find jobs without a lengthy integration process, Ukrainian refugees could help the market to respond to the currently buoyant demand for labor and address worsening skill shortages.”

In addition to the human toll of Russia’s invasion of Ukraine, the fallout from the war has caused lasting damage to the euro area’s economy. The ECB predicts it will grow just 2.8% this year.

The region was already battling a rapidly ageing population that has shrunk its share of working-age people. Insufficient labor supply is a significant challenge for companies, with 27% of businesses citing labor as a key factor limiting production in a recent European Commission survey.

The ECB report assumes that Ukrainian refugees will be able to integrate into the labor market more quickly than previous waves of refugees from Syria due to the country’s greater cultural proximity and the European Union’s swift response to assist them.

However, it cautioned that high levels of uncertainty surrounding the future course of the war makes it harder to accurately assess and quantify the eventual impact.

© 2022 Bloomberg

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