Russia’s full-scale invasion in 2022 caused Europe’s biggest displacement crisis in decades as millions fled, most of them women and children. Three years later, there are still more than 5mn Ukrainians living abroad and only 20% say they will go home again should the war stop, the Financial Times reports.

The good news is that they have found jobs at much higher rates than is typical for refugees, according to Jean-Christophe Dumont, head of the international migration division at the OECD. In many host countries, Ukraine's refugee employment rate is twice what is typical for refugees from other countries.

Ukrainians’ employment rates appear particularly high in countries like Poland which was already working hard to attract Ukrainian economic migrants due to labour shortages in its booming economy. Faced with low wages at home, migrant workers were typically travelling to Poland for three months and sending back some $10bn a year in remittances, an important source of foreign exchange for the otherwise struggling economy. In contrast, Ukrainian refugee wages are much lower in places such as Norway, where there is a bigger language barrier, reports the FT.

But the EU worked to mitigate these problems and extended “temporary protection” status after the war started, which meant Ukrainians didn’t have to apply for individual asylum and could instantly access jobs, housing, schooling and social welfare. Many countries ban individual asylum seekers from other countries from working while their applications are processed.

And the refugees have spread out across Europe. Following the outbreak of war in February 2022, most made a dash for Poland, which took in over 1.5mn refugees. But once out of the war zone, those refugees started to work on finding more permeant accommodation and tackling the paperwork needs to settle in other EU countries. Initially, some 100,000 arrived in Germany, a favourite choice due to the high quality of life and generosity of the German government, but that number has climbed steadily to around 1.1mn today, while the Polish population has fallen back to around 950,000 now, according to the latest estimates in June.

However, after more than three years of war, the Ukrainian refugees are settling into their new homes and overcoming the language and documentation barriers to better jobs. According to the Centre for Economic Strategy, a Ukrainian think-tank, the proportion of refugees who said they had to save or borrow to afford clothing rose from 7% before the war to 28% by November 2022. But by December 2024, that share had decreased back to 7%, the FT reports.

Refugees a net economic plus

The inflow of refugees has been a boon to the Central European countries that took them in. The increased labour pool, willing to work at lower wages, has given a boost to the national economy. The National Bank of Poland estimated in 2023 that the influx of Ukrainian refugees contributed approximately 0.5 percentage points to GDP growth in both 2022 and 2023.

At the same time the more than a million refugees in Poland alone have also lifted consumption, further boosting the economy as they spent to set up new households. In 2022, the NBP and the Polish Economic Institute (PIE) estimated that Ukrainian refugees added between PLN17bn and PLN20bn ($4bn-$4.8bn) in additional household consumption to the Polish economy.

And the Polish government has gone out of its way to accommodate the new workers, which it wants to hang onto. By mid-2023, over 400,000 Ukrainian refugees had registered for work in Poland under simplified procedures.

Finally, the increased gross national product from the new labour comes with downward pressure on inflation as wage increases rise a lot more slowly in a large pool of refugees than if the same GNP increase was being driven by Poles.

The NBP noted that the arrival of millions of refugees in 2022 added modest inflationary pressure, especially in urban areas, as demand for housing jumped. In cities like Tbilisi in Georgia, the cost of renting an apartment has more than doubled as hundreds of thousands of both Russian and Ukrainian fled to the visa-free safe haven.

After the initial boost in inflation, as the refugees settled in, prices were then pushed down in the second year. By easing labour shortages, particularly in low- and medium-skilled sectors such as caregiving, retail and hospitality, Ukrainian refugees helped to contain wage growth, which in turn mitigated broader inflationary pressures. PIE estimated in 2023 that the refugee-driven labour inflow had a slightly disinflationary effect over time, particularly as more refugees entered formal employment.

Quality workers, staying put

In addition to being cheap, Ukrainian refugees are skilled and well educated. A survey of EU countries found that roughly two-thirds of Ukrainian refugees have tertiary education and more than 40% have a master’s degree or higher. “Not only are they more educated than most other refugee groups, they are more educated than many host country populations too,” the FT reports.

Pre-war, labour migration was a temporary phenomenon: as bne IntelliNews reported at the time, typically a migrant worker planned on staying a mere three months in the host country to earn some cash and then return home.

Once the war started, in the first year three quarters of the refugees said they intended to return home if peace broke out. However, as each year passes more and more refugees are settling in for the long term. As eight out of ten refugees are women with children, as their kids settle into new schools, master the local language and build up new lives, these families are becoming more and more reluctant to return to Ukraine, where the economy has been smashed by the Russian bombing and jobs and pay are few and low.

And it will probably stay that way for the foreseeable future. While the international community has donated or lent Ukraine a total of some €133bn to fund Kyiv’s war economy, so far there has been only limited commitments to funding Ukraine’s reconstruction.

In its latest assessment, the World Bank says that Russia has caused $528bn worth of damage, yet the international financial institutions (IFIs) only plan to disburse a total of $75bn over the next ten years to fund the recovery, according to a report by the Peterson Institute for International Economics (PIIE). Stay-away refugees will only make Ukraine’s recovery and rebuild harder to do.

As so many of the refugees are women, the impact on demographics will also be a disaster. As bne IntelliNews reported, Ukraine has the worst demographics in the world and the population has already fallen from some 41mn pre-war (excluding the Crimea) to an estimated 29-30mn now, but the UN estimates that the population will shrink further to 25mn by 2030 after births in 2023 fell to a historic low of 180,000, further undermining the recovery process. Ukraine’s replacement rate had already fallen to 1.1 children per woman in 2021 (you need 2.1 to keep a population size stable), but since the war started that rate has dropped off a cliff. Ukraine had one of the lowest birth rates on the planet and then a war broke out.

According to CES surveys, the share of refugees who say they definitely plan to return has dropped from 50% in November 2022 to 20% in December last year.

The mitigating factor in having such a large diaspora is that remittances should surge well beyond the €10-14bn a year workers used to send home before the war, equivalent to 8-10% of GDP. That could, for example, cover the €20bn trade deficit with the EU Ukraine currently runs, but that won’t replace the missing consumers in the domestic market needed to drive a real “bounce back boom” the country needs to recover.