The invasion of Ukraine by Russia puts the labor markets of several countries including both nations involved in the conflict at risk.

Ukraine’s outsourcing of tech services, a sector that has bounded ahead in recent years with customers in Europe and the US, is at risk after Russia invaded Ukraine.

Following the invasion, internet outages occurred across the country, according to a monitoring dashboard run by the Georgia Institute of Technology.

Kerry Hallard, chief executive of the Global Sourcing Association, a UK-based trade group, said that at one member business in Kharkiv, Ukraine, 80% of computers had no internet access, according to Dow Jones.

The conflict “is going to have massive repercussions because Ukraine is obviously a huge country, a huge IT delivery nation,” Hallard said. Technology workers in the country support fields including banking, insurance, and other financial services operations, she added.

Ukraine’s information technology sector has been booming. Its IT export volume increased 36% last year, according to research from the IT Ukraine Association, an IT recruitment firm.

Katie Gove, an analyst at researcher Gartner Inc., estimates there are 85,000 to 100,000 export service workers in Ukraine, employed predominantly in software engineering and other IT services. Ukraine is a hotbed of talent, she said, in part due to its strong academic tradition, which nurtures skills such as software engineering and application development.

Fiverr has said the majority of its Ukraine-based workers have moved to “safe places both inside and out of Ukraine,” while other technology firms such as SAP and Wix have either closed their offices or relocated their employees to other counties. 

The Wall Street Journal reports that, along with SAP, other companies operating in Ukraine as well as Russia have started putting contingency plans into place. Executives began closing offices and factories Thursday, ensuring staff were safe and sending some to the Polish border. Companies such as Nestle have closed their factories.

Meanwhile, CTK News Agency, citing employment agencies and construction firms, reports that the possible departure of Ukrainians from the Czech Republic [ST1] will primarily affect the construction industry and job agencies think it unlikely that especially illegally employed Ukrainian workers would disobey a call-up order.

ManpowerGroup Recruitment and Marketing Manager Jiri Halbrstat expect that mobilization will mean that Ukrainians with short-term visas will leave the Czech Republic.

“Unfortunately, there is also a large number of Ukrainians who are employed here illegally, and they would have to leave immediately in the event of mobilization,” Halbrstat said. “This would mainly affect the construction sector, where there is a large number of subcontracting companies with this type of workers.”

“The departure of even just a part of the workers could have significant effects on the entire Czech labor market,” said Vlastimil Vaclavik, international recruitment manager at Grafton Recruitment.

Vaclavik said that if obtaining workers from Ukraine becomes impossible in the long term, the Czech Republic risks economic stagnation and possible layoffs.

Czech Association of Building Entrepreneurs president Jiri Nouza estimates that there are around 20,000 Ukrainian workers in the construction industry. Meanwhile, haulers are also concerned about the possible departure of Ukrainians, as they represent a large part of professional drivers in the Czech Republic, said Martin Felix, spokesman for haulers’ association Cesmad Bohemia.

SIA’s recently published report, “International Talent Mobility,” by Fiona Coombe, director of legal and regulatory research, revealed that the EU is Ukraine’s largest trading partner, accounting for more than 40% of its trade in 2019. Since 2014, the number of Ukrainian labor migrants moving to the European Union increased significantly. In 2019 alone, Ukrainian nationals received 660,000 residence permits for remunerated activities across the member states, the largest external labor force in the EU.

The conflict could also impact the Russian labor market. Following the invasion, the EU, US, and the UK approved wide-ranging sanctions against Russia.

Russian tech companies are poised to suffer from the sanctions, which could reduce their access to critical technologies in the country, according to Dow Jones.

European Commission President Ursula von der Leyen said that sanctions will hit “strategic sectors of the Russian economy,” by blocking access to technologies and markets in response to Russia’s attack on Ukraine. Following news of the sanctions, Russian job board HeadHunter saw shares fall 56.4% on the day.

Meanwhile, BBC reported that Ukraine’s neighbors are preparing for an influx of refugees fleeing Russia’s invasion of the country. It is unclear how the continued invasion could impact labor migration for the EU.

In September 2020, the Commission published its New Pact on Migration and Asylum, a mechanism for attracting skills and talent to the EU. The New Pact proposed adopting the Blue Card Directive, by which it aims to attract as well as retain qualified workers, in particular those that are needed in the sectors that are facing skills shortages.

In 2014, when Russia seized and annexed Crimea, pro-Russian President Viktor Yanukovych was also ousted and the economy of Ukraine took a hard hit. In 2020, Ukraine’s unemployment rate stood at 9.48%.

SIA’s report on the Ukrainian market for European and global corporate members showed that the country’s staffing market saw strong growth since the country’s last economic downturn in 2013. However, since then, the country has faced the Covid-19 pandemic and is now in the midst of a conflict with Russia, which will reverse the country’s growth.

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