DOI: https://doi.org/10.62204/2336-498X-2025-1-8

Human capital of Ukraine:

challenges and opportunities

 

Nataliia Ivanova,

Candidate of Economic Sciences, Associate Professor,

National University of Kyiv-Mohyla Academy, Ukraine,

n53ivnova@gmail.com; ORCID ID: 0000-0003-4182-5829

Tetyana Kuznetsova,

Candidate of Economic Sciences, AssociateProfessor,

Science and Research Institute of Social and Economic Development, Kyiv, Ukraine,

takyta@ukr.net; ORCID ID: 0000-0003-2800-3847

Artem Horilyi,

Postgraduate Student,

National University of Kyiv-Mohyla Academy, Ukraine,

a.horilyi@gmail.com; ORCID ID: 0000-0003-2043-5768

 

Annotation. The global economic challenges caused by the full-scale war in Ukraine emphasize the need to develop human capital as a key factor in the success of companies and economic recovery. As studies have shown, in the conditions of martial law and post-war recovery in Ukraine, the introduction of digital technologies is becoming a key factor in the modernization and increase in the efficiency of the state economy.

Keywords: human capital, post-war recovery, digital technologies.

 

Introduction. The need for human capital development is driven by rapid changes in the global economy, technological progress and the growing importance of knowledge and innovation. For Ukraine, human capital development is particularly relevant because Russian military aggression against Ukraine negatively affects labor market trends and economic activity of enterprises. This leads to the loss of qualified workers and a decrease in the general level of productivity. In these conditions, the Ukrainian government faces the difficult task of finding opportunities to compensate for the loss of human capital and restore the competitiveness of the state. One of such opportunities is the development of digital technologies and the formation of a digital culture that will contribute to the digitalization of the Ukrainian economy.

Analysis of studies and statement of the task. It should be noted that as of now, a small number of publications and studies on the topic of human capital and the development of the digital economy in wartime have been published. However, these topics are beginning to be actively studied by domestic experts. Thus, issues of human capital in Ukraine in wartime and the assessment of human capital losses as a result of Russian aggression were studied by such Ukrainian researchers as M. Nalbandian, Yu. Zaloznova, N. Azmuk, O. Pishchulina and others. L. Prodanova, I. Yehorov, O. Nykyforuk, V. Vyshnevskyi, O. Harkushenko, N. Shapoval, M. Fedoseienko, O. Hrybanovskyi, O. Tereshchenko and others devoted their works to justifying the need for digitalization of the Ukrainian economy.

Therefore, in the opinion of the authors, the issue of restoring human capital and developing the digital economy remains extremely relevant and strategically important.

The purpose of the article is to study the state of Ukrainian human capital during the full-scale Russian invasion and to justify the need for Ukrainian digitalization as a strategic direction for compensating for human capital losses.

To achieve the goal, the following methods were used: theoretical for analyzing scientific sources and assessing the role of human capital in economic activity; empirical for processing data and systematizing them and identifying the main factors of labor supply reduction; abstract-logical for formulating general conclusions and research results.

Study results. Analyzing the state of human capital in Ukraine, it is worth giving a definition of this economic category. The conducted studies showed that there is no generally accepted definition of the category “human capital”, but many formulations contain the same important characteristics and signs of human capital. This allows us to state that human capital is a stock of knowledge, abilities and skills of a person regarding productive activity in various spheres of social life. Therefore, in further studies, analyzing the state of human capital in Ukraine and looking for ways to restore and develop it, we will have in mind exactly such a formulation.

In the modern economic environment, which is undergoing constant changes and transformations under the influence of scientific and technological progress and the phenomena of Industry 4.0-5.0, the role of human capital is becoming more and more important every year. The search for the most important factors of economic development and success is based largely on the human factor and its comprehensive development. It is human capital that plays a crucial role in economic reproduction, as it directly relates to the skills, knowledge and experience of the workforce, which contributes to the further success of the company. Investments in human capital lead to improved business performance by increasing productivity, generating creative solutions and developing innovations in the organization. Regarding the macroeconomic level, countries that prioritize the development of human capital have more chances and opportunities to achieve sustainable economic growth and gain a competitive advantage in the global market[1].

On the eve of the full-scale invasion, Ukraine was defined by its highly qualified, well-educated, creative and motivated human capital for effective work. According to the Global Talent Competitiveness Index (GTCI, 2021), Ukraine ranked 61st out of 155 countries. According to the integrated indicators, Ukraine ranked as follows: Enable – 85, Attract – 80, Grow – 57, Retain – 59, Vocational and Technical Skills – 69, Global Knowledge Skills – 39 [2].

The listed indicators are combined into two groups: the first four indicators assess the conditions, policies for the formation and promotion of talent development in the country; the last two are the result of the previous ones, the quality of talent. It should be noted that despite the insufficiently favorable conditions for talent development, Ukraine had a high score on the indicator “global knowledge skills”. This indicator takes into account the workforce with higher education, scientists, professionals and senior managers, as well as the impact of talent on economic development [3].

Among the most well-known and successful international strategies for the development of human capital in countries around the world is the United Nations Human Development Program (UNHDP). This initiative, aimed at increasing human capital, expands the concept of development to include health, education, and living standards, rather than focusing solely on economic growth. The central indicator of the UNHDP is the Human Development Index (HDI), which ranks countries by life expectancy, education level, and per capita income [4].

As of 2024, HDI of Ukraine is 0.734 and ranks it to the states with high level human development (100th place among 193 countries) [5].

Thus, during the years of independence of Ukraine the HDI increased by 0.4%. However, due to the influence of pandemics, growth of population mortality level, full-scale invasion and decline economic activity in the country the gradual decrease of HDI value is observed.

According to the forum Human Capital UA, the migration of over 6 million Ukrainians has caused a reduction in the labor force by almost 22%. Such fluctuations in labor resources and a decrease in economic activity have led to a decrease in household incomes by 65%, of which 44% cannot meet their basic needs at all [6].

One of the main challenges that will affect the prospects for further economic development is the decline in human capital, in particular the reductionof labor potential, which is necessary for the country’s post-war recovery.

Even before the full-scale invasion, Ukraine was facing a labor shortage. The problem of labor shortage was seen as a major factor holding back economic growth. But now the economic situation in the country has become even more difficult, which is due to the challenges and threats to development of Ukraine from a demographic point of view.

According to expert estimates, in 2023 the working-age population of Ukraine decreased by 39.2%, compared to 2021: from 17.4 million to 12.5 million, and in 2024-2032, according to forecast calculations, it may decrease to 11.7 million [7].

According to studies of the Ukrainian Institute for the Future, today 58.6% of the population in Ukraine is professionally inactive [8]. Demographic losses and occupation played a significant role (about 40% reduction in the labor force in 2023, compared to 2021), as well as a decrease in the economic activity of the population (due to possible difficulties in finding work for internally displaced persons, the need to care for other family members), an increase in the number of pensioners, and a lack of skills in demand on the labor market. The reduction in the labor force was widespread in all regions of Ukraine, but it is most noticeable in regions with active hostilities.

According to the Confederation of Employers of Ukraine, in 2022-2023, companies lost more than 781 thousand men: some were dismissed from their jobs, others were mobilized, and otherswent to other places or transferred to unofficial work. At the same time, almost twice as many women left the labor market as men: up to 1.5 million: most of them went to other places with children or lost their jobs after the start of active hostilities. The labor market of Ukraine as a whole decreased by 2.23 million people[9].If before the war there were 12.3 million official taxpayers, now there are just over 10 million.

According to research by OlhaPyshchulina, who is a leading expert on social and gender programs at the Razumkov Center, the main factors reducing the labor supply include: demographics, migration, labor shortages, and mobilization [10].

Demographic factors include, first of all, the decline in birth rates and the reduction in average life expectancy. The birth rate in Ukraine has fallen to the lowest levels among European countries. The birth rate is currently 0.7 (to maintain the population at a stable level, this rate should be 2.14). In addition, the birth rate will be significantly affected by the separation of families, which occurs as a result of mobilization or the fact that women have gone abroad and men have remained in Ukraine. As for the reduction in life expectancy, for men it is expected to decrease from 66.4 years to 57.3 years, and for women: from 76.2 years to 70.9 years [10].

One of the key risks for the economic development of Ukraine is the deepening of negative migration trends. Almost half of the reduction in the working-age population was provided by the departure of external migrants from the labor force. According to various estimates, from 6 to 8 million working-age people have left abroad, and the countries that have provided asylum to Ukrainian citizens will not always facilitate their return to Ukraine [11].

In 2023, the absolute majority of employers faced a shortage of personnel. This is exacerbated by the uneven recovery of the labor market both geographically and in industry terms. According to the results of a study of the labor market in Ukraine conducted by the European Business Association, three quarters of employers are experiencing a shortage of personnel in Ukraine: this was reported by 74% of respondents [12] (in autumn of 2023 the result was 55%).

Another factor leading to a shortage of personnel in the Ukrainian labor market is mobilization. The most important consequence for the labor market of the adoption of the Law “On Amendments to Certain Legislative Acts of Ukraine Regarding Certain Issues of Military Service, Mobilization, and Military Registration” [13] and the upcoming mobilization process is an increase in the labor shortage. In 2022, there was a shortage of women in Ukraine, as a significant part of Ukrainian refugees are women with children.

Now, companies that mainly use male labor: retail, manufacturing, construction, logistics, transportation, and agriculture are experiencing a shortage of workers [10].

Thus, Russian full-scale military invasion of Ukraine has led to enormous losses of human capital and the destruction of millions of jobs. The Ukrainian government faces a strategically important issue of compensating for the losses of human resources. Restoring Ukrainian human capital is a complex task and requires the combined efforts of the government, the community, and business.

As scientists note, in the conditions of martial law and post-war reconstruction of Ukraine, the introduction of digital technologies into the management practices of business entities is becoming a key factor in the modernization and increase in the efficiency of the state economy. The rapid and high-quality restoration of industrial and agricultural enterprises, social sphere and infrastructure facilities destroyed by military actions in the post-war period requires a radical modernization of the applied technologies and management approaches. Digital technologies are capable of optimizing and significantly accelerating the above processes. The integration of digital solutions into the management practices of business entities (of different levels, spheres, industries and forms of ownership) can become a determining factor in solving a number of strategic tasks: increasing labor productivity, optimizing resources, improving the quality of decision-making and ensuring the flexibility of business processes. Moreover, the digitalization of management corresponds to modern global trends and can significantly increase the investment attractiveness of Ukraine. In the context of post-war recovery, the introduction of digital technologies into management practices becomes a necessary condition for ensuring accelerated socio-economic development and successful integration of Ukraine into the global digital economy [14].

The results of the analysis of theoretical and applied scientific research [15,16], as well as leading world practices [17] allow us to state that the following digital technologies may be relevant for the post-war recovery of Ukraine: cloud technologies, big data processing technologies (BigData), artificial intelligence (AI) and machine learning, Internet of Things (IoT), blockchain, digital twins, digital platforms.

In the work “Digital Technologies in Management Practices of Ukrainian Economic Recovery in the Post-War Period”Prodanova L.V. notes the key areas of application of digital technologies [14]. Cloud technologies (a model of providing wide and convenient network access to a shared pool of computing resources that can be quickly provided and released with minimal management costs or appeals to the provider) are suitable for rapid restoration and scaling of IT infrastructure of business entities, in particular without significant capital investments, which is important in the conditions of limited resources of the post-war period. Cloud technologies provide data availability and the possibility of remote work, which is also important in critical and unstable conditions of business recovery [14].

Big data processing technologies (a set of approaches, tools and methods for processing large amounts of structured and unstructured data to obtain results that can be perceived by a person) can ensure informed decision-making, optimization of business processes and forecasting of market trends. In the context of economic recovery, this will contribute to the effective allocation of resources and accelerated adaptation to changing conditions. The use of artificial intelligence (intelligent machines capable of performing tasks that usually require human intelligence, and the results of their “training”) allows you to automate cyclical and standardized processes, increase the efficiency of operations and improve customer service, which contributes to the restoration of production, optimization of logistics and personalization of services. The Internet of Things (a network of physical objects equipped with electronics, software, sensors and network connectivity that allows these objects to collect and exchange data) can affect the following processes: the creation of “smart” enterprises, optimization of resource use and increased production efficiency. In the context of post-war reconstruction, such technology is especially important for implementing the principles of sustainable development and energy efficiency in the activities of business entities. Blockchain technologies can ensure transparency and security of transactions, which is especially important for restoring the trust of investors and partners from abroad. Digital twins (virtual copies of physical objects, processes or systems that allow modeling and optimizing their operation in real time), in the context of the restoration of the Ukrainian economy, will be especially useful for: optimizing production processes, predicting potential problems and preventing failures in the operation of various systems, testing new strategies and scenarios without risk to real assets, increasing the efficiency of infrastructure and resource management. Digital platforms (technological solutions that ensure the interaction of various market participants in a single digital space) in the context of the post-war restoration of the Ukrainian economy can play a key role in solving the following tasks: creating new business models and new markets; ensuring coordinated interaction between the business sector, government structures and civil society; promoting the development of small and medium-sized businesses; increasing the transparency and efficiency of economic processes [14].

Conclusions. Human capital is the main source of economic development of the country. In the conditions of the ongoing full-scale war and significant losses of labor resources, the development of human capital is strategically important. The government of Ukraine faces difficult tasks in returning citizens to their homeland and building an effective system for the development of human capital. Studies show that it will not be possible to return all citizens of Ukraine and the longer the war lasts, the higher the percentage of non-returns will be as people adapt to life abroad.

Thus, the efforts of the government of Ukraine should be aimed at creating a favorable environment for the return of citizens and building an effective system for the development of human capital. One of the extremely important factors in solving these tasks is the formation of a digital economy in Ukraine.

 

References:

 

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