Half-measures: why the government is losing the fight for migrants

An article by Gremi Personal owner Evgenij Kirichenko on Minfin.com.ua

Original in Ukrainian: minfin.com.ua

In today's world, people are free to choose where to work and study. The best places go to the most capable and hardworking. States are forced to compete with each other for citizens, for their minds and hands.

Evgenij Kirichenko, owner of Gremi Personal (Poland), told the Ministry of Finance about the steps Poland is taking to curb the migration of its citizens to more prosperous countries in Europe, and about what Ukraine can learn from its neighbours.

Ukraine is still a donor of labour for Poland, Italy, the Czech Republic, Portugal and many other countries. Although the NBU seeks to further limit migration, the UN forecasts a decline in Ukraine's population to 35 million by 2050.

Under such conditions, a company needs crisis management. The same applies to the Ukrainian state, if it does not want to remain at the bottom of global rankings.

Is there light at the end of the tunnel?

Recently, the Ukrainian parliament proposed using the experience of neighbouring Poland and not paying social insurance contributions for workers under 27, as well as abolishing personal income tax for them. The idea is good, but will it stop young people from migrating abroad? It is like plugging one hole in a colander.

The government must present its position and vision. Just a month ago, the Cabinet of Ministers authorised the Ministry of Economy to deal with the labour migration of Ukrainians. Unlike the Ukrainian state, in neighbouring Poland the Ministry of Family, Labour and Social Policy handles the issue of citizens going abroad.

To keep Poles in their homeland, there is an entire social system of programmes supporting young families, their children, housing issues for people under 35 and the elderly, and subsidies for low-income families. Poles rely on the development of human capital and the social protection of their own citizens.

For six years now, Poland has applied a comprehensive approach – the Human Capital Development Strategy. This programme aims to achieve well-defined goals: increasing employment, raising people's professional activity, growing competencies and improving citizens' health. It is complemented by the Strategy for Responsible Development adopted in 2017. Its goal is to increase the income of Polish residents while strengthening cohesion in social, economic, environmental and territorial dimensions.

Support for starting your own business

In Poland, public employment services not only look for jobs for those who do not have one, but also undertake co-financing of starting one's own business. It is enough to submit an application setting out the amount of funds needed and a business plan. The amount of funding is limited to the size of the average salary over six months – about UAH 180,000.

Providing Poles with housing

In recent years, several programmes have been successfully operating in Poland:

"Housing for the Young." The state covered part of the cost of a loan for an apartment or house (50–65 sq m of usable area). Depending on the number of children, one could expect 10–30% of the cost of the housing. If a family has more than three children, there is an option to participate in the programme again. The loan under the programme must be taken out for at least 15 years.

Last year, PLN 768 million (UAH 4.8 billion) was allocated to this programme. The programme was planned for five years, until 2018, and is considered successful. It was successively replaced by the Individual Housing Account programme with no age limit – an opportunity to save up for one's own home and not pay 19% income tax.

In Ukraine, attempts were made to launch an analogue, which is formally valid today. This is a programme to help obtain affordable housing. However, its funding is only UAH 100 million year after year. This year, 380 citizens out of 12,325 families in the open register received housing.

"Housing Plus" is a programme for all age groups. Launched a year ago, its core is building affordable housing and renting through long-term lease options with a right to buy. Programme participants pay a quarter more for utilities and a symbolic sum for rent, and after 25 years the housing becomes the citizen's property.

Refund of value added tax in the cost of building materials for housing construction. This programme also operated until 2018 and covered people under 36. In Poland, VAT is 23%.

Tax breaks and financial support per child

A family with a child under 18 or a student under 25 can expect a tax break of PLN 92.67 per month for the first child and PLN 225 for the fourth child (UAH 6.3/PLN). This break can be used by any adult whose income is less than PLN 56,000 per year (less than UAH 30,000 per month).

Separately, the state pays PLN 500 per month for each child, regardless of the family's income. These rules have been in force since 1 July, although the programme has been running since 2016. After the rules were updated, more than 2.6 million Poles took part in the programme.

And this is not an exhaustive list of assistance. From this year, every primary, middle, vocational and art school pupil receives PLN 300 for school supplies. This is provided by the "Good Start" programme. Another programme, "School Kit", is responsible for ensuring that pupils have publicly available textbooks for learning.

Subsidies for utility services

If a family has, on average, less than PLN 1,277.25 per person – a quarter more than the minimum pension in Poland – it is entitled to assistance that will be paid over the next six months. The amount of the subsidy is calculated on the basis of family income, housing maintenance costs and rent rates in the municipal housing fund.

What to do in Ukraine?

There is no need to reinvent the wheel – it is worth using the experience of neighbours with similar problems and adapting it to Ukrainian reality. Specific and systemic programmes are needed, not separate legislative initiatives by MPs, as in the case of the draft law abolishing taxes for young people.

And what does the Ministry of Economy and Trade Development offer in the Ukrainian government's five-year programme to combat labour migration? Creating a job search website…

As Poland's experience shows, the time from adopting a strategy to implementing programmes at full capacity takes more than one year. What is also needed is the authorities' desire to work systematically and strategically.

Overall, it is now unclear what direction Ukraine has chosen and what it wants to achieve. Reforms are a process. They must have a final goal that must be seen at the outset. Not only citizens have no idea about it, but neither has the state leadership for decades. This is the source of all problems. Ukraine needs its own business plan and a clear implementation of it.