Labour productivity in Ukraine: trends, challenges and skills

Businesses in Ukraine are facing an acute labour shortage. Due to migration, mobilization, and demographic changes, the labour force available to Ukrainian businesses has shrunk, and this shortage remains one of the main constraints on business growth.

Under these conditions, companies need to find ways to grow without proportionally increasing their workforce. However, half of Ukrainian companies do not believe this is possible.

One solution to the labour shortage is increased labour productivity—that is, the ability to produce more with the same number of employees. We examined three ways in which small and medium-sized businesses in Ukraine can boost productivity without hiring additional staff: automation, digitalization, and employee training.

We’ve compiled our key recommendations on this page, and you can find the detailed results, methodology, and conclusions of the study in the full report.

Increasing productivity requires investment in capital, people, and technology

Even before the full-scale war, labour productivity in Ukraine was among the lowest in Europe—65% below the EU average. It was held back by low value added and labour-intensive production, as well as an inefficient, large public sector with low-profit state-owned enterprises.

In 2022, productivity fell to 75% of its 2021 level due to the destruction of production capacity and a reduction in the available labour force. Since then, its recovery has been largely supported by the government, particularly through defense spending. Starting in 2023, productivity across the economy gradually increased, but in 2025 it was still 15% below the 2021 level.

Further recovery requires simultaneous changes in several areas: more flexible labour market regulations, more accessible financing and technology, the rebuilding of production capacity and resilient infrastructure, as well as the development of skills, the education system, and businesses’ ability to adopt new technologies.

It’s time to shift from quantity to quality

Businesses have an urgent need for workers, and this need will continue to grow; at the same time, the ability to meet this need through additional hiring is limited. 53% of companies expect their need for workers to increase over the next 2–3 years, and only 11% anticipate a decrease. Under these conditions, the traditional model of growth through workforce expansion is becoming increasingly unsustainable.

The labour shortage has not only a quantitative but also a qualitative dimension. According to employers, there is a particularly acute shortage of skilled workers, equipment operators, foremen, and crew leaders. It is precisely for this category that a lack of necessary skills is most frequently cited. At the same time, companies view the lack of competencies as a less acute problem than the shortage of workers themselves.

The solution lies in increasing the productivity of existing employees and correspondingly improving their qualifications and skills.

There is a need to engage companies that have not yet begun their technological transformation

Measures aimed at increasing labour productivity are a fairly common practice among SMEs, despite the war. Over the past year, 58% of companies have implemented automation or digitalization, or provided training for their employees, and 60% plan to implement at least one of these measures in the coming year.

The most common measure is training, retraining, and professional development for staff—implemented by 33% of companies. Digitization—the implementation of digital systems, new software, or AI—was carried out by 30% of companies, while automation or the modernization of production and equipment was implemented by 21%.

Companies that already have experience with such changes are most likely to plan new initiatives. In contrast, 61% of companies that have not implemented these measures do not plan to do so in the future. Thus, there is a risk of a gradual gap emerging between companies that have already embarked on a path of technological and organizational transformation and those that remain outside this process.

Automation and digitalization help produce more, while employee training helps improve the quality of work

Among companies that have implemented automation and digitalization, 41% and 34%, respectively, reported an increase in production volumes, while 25% and 28% reported an increase in profitability. Among those that trained their employees, 56% reported an improvement in the quality of products and services, and 45% reported an increase in productivity.

At the same time, automation and digitalization create a need for new employee skills and often go hand in hand with training. After implementing digitalization, 76% of companies require new skills; after automation, 69% do.

Automation requires skills in working with new equipment and technology, as well as computer programs, digital systems, and AI. For digitalization, the most important skills are new computer skills (76% of companies), as well as the ability to learn and adapt (54%).

Greater collaboration is needed between businesses, local governments, and educational institutions

Despite the need for new knowledge and skills, the connection between SMEs and educational institutions regarding employee training remains weak. Training most often takes place within companies—through workshops and mentoring (57% of those who provided training)—while only 12–13% of businesses utilize vocational and higher education institutions.

SMEs primarily expect training programs to be flexible and adaptable to the company’s needs—this is the view of about half of the companies that have implemented or plan to implement training. Companies also value an emphasis on practical skills (about 40%) and short training duration (42%).

A lack of communication also limits business participation in training: among companies that do not train their employees, 17% are unaware of relevant institutions or courses, and 12% are unaware of available training opportunities.

At the same time, about half of companies are ready or somewhat ready to collaborate with local authorities and vocational education institutions. Practical forms of collaboration—internships, dual education, and working directly with students—may be the most natural entry point for deepening cooperation between businesses and educational institutions. Larger companies are also more likely to be open to such collaboration.

This research was conducted within the framework of a grant received from the Skills Alliance initiative.