How does a labour market function and perform under the strain of a long intense war? Understanding how labour markets work during wars requires going beyond aggregate outcomes. The literature has primarily focused on the macroeconomic consequences of conflict, documenting large and persistent negative effects of wars on output and growth. Recent papers on this topic include Benmelech and Monteiro (2025), Chupilkin and Koczan (2022), and Federle et al. (2024). Research on labour markets has focused on post-conflict reconstruction and reintegration (which we survey in Anastasia et al. 2022). Much less is known about the granular functioning of large economies during wars. Due to the fog of war, data were unavailable or unreliable. Ukraine is a rare exception: the war did not prevent the collection of labour market data. This allowed us in Anastasia et al. (2026) to conduct a much richer analysis of wartime labour markets than in earlier episodes, focusing on the formal civilian economy in government-controlled areas.

The aggregate picture

The full-scale Russian invasion of Ukraine in February 2022 has generated one of the largest combined labour supply and reallocation shocks in recent history. Out of an estimated population of 41 million people in 2021, close to 7 million are no longer in the country, of which 70% are adults. Out-migration alone implied an estimated reduction of about 3 million workers. At least 700,000 citizens were mobilised into the army. By late 2025, around 70,000 Ukrainians had been killed in combat and 400,000 wounded, most of them working-age men. Civilian casualties amount to 50,000 people either killed and injured. Millions of citizens remain under Russian occupation. Taken together, this amounts to a contraction of about one fourth of the initial labour force in areas still under government control – a negative labour supply shock of unprecedented scale. The negative labour demand shock was also severe, though with less persistent effects.

Figure 1 Ukrainian oblasts by exposure to the conflict

Note: Based on terciles of hours of air raid alarms from February 2022 to October 2025, partially occupied oblasts hand-coded as contested

Shortages have been amplified by the massive and multidimensional reallocation taking place as a result of the war. Economic activity has shifted towards the west of the country, which is less exposed to air attacks. In some contested and partially occupied regions, local labour markets have almost ceased to exist, with virtually no vacancies or workers left. In contrast, areas further from the front lines have seen smaller reductions in employment and, in some cases, an increase in productivity and dynamism.

The sectoral composition has also changed. Before the war, services related to energy and mining, professional and scientific activities, and construction were growing; since 2021, however, industries related to defence (production of weapons, ammunition, military vehicles) and some specialised manufacturing sectors have been advancing. The most marked declines are concentrated in extraction, transport, and consumer services such as hospitality – likely a combination of changing consumer demand and these sectors being most hit by military mobilisation.

In light of the ongoing disruption, it would have been reasonable to expect very negative economic indicators. Yet, aggregate outcomes suggest an ability to reallocate labour with surprising speed under conditions of extreme stress. The unemployment rate spiked in 2022 (peaking above 20%) but later declined; by 2025 it stood at 11.5%, not far from its pre-invasion level of about 9%. Real wages (adjusted for inflation, which was high during the conflict) had already returned to above pre-war levels by 2024. Despite the great difficulties, the Ukrainian labour market appears to have been resilient.

Figure 2 Unemployment rate

Sources: State Statistic Service of Ukraine, National Bank of Ukraine, Ukraine Ministry of the Economy.

Figure 3 Average wage of a full-time employee, nominal versus real

Note: Normalised to last quarter of 2021
Source: NBU.

Matching jobseekers and vacancies during a war

In a wartime economy experiencing massive displacement and reallocation, can workers and firms still find each other? To answer the question, we analysed data from Work.ua, Ukraine’s largest online platform where companies post job offers and jobseekers upload their resumes. We estimated the efficiency of matching between workers and firms – in other words, given a certain number of vacancies and a certain number of jobseekers, how often supply and demand actually meet. A simple example: imagine there are ten companies with one open position and ten unemployed people. If efficiency is maximal, up to ten hires can be generated; if it is minimal, none. The more frictions there are in the market, the more this efficiency decreases. We traced how it evolved before and after the invasion across regions (experiencing different intensities of conflict exposure) and sectors. To our knowledge, no prior study evaluates the matching of job seekers and vacancies in a wartime economy.

Three findings emerge from the data. First, in the period since the full-scale invasion, matching efficiency declined by about 15%. It became more difficult for firms to find workers to hire and for jobseekers to find employers willing to hire. The decline is significant, but not catastrophic: it is less than what was estimated during the 2008 financial crisis in the US. Second, the situation is very heterogeneous. In the regions most exposed to the crisis, the reduction reaches about -20%, while in the western regions the picture is significantly better. A similar story applies to sectors: many blue-collar occupations are experiencing relatively modest declines, while non-essential personal services are suffering the most. Third, direct exposure to conflict – measured using data on air raid alarms – makes it significantly more difficult to match labour supply and demand. It is not only major shocks that matter, but also daily disruptions that generate fear, uncertainty, damage to infrastructure, and blackouts.

Wartime adjustment mechanisms

What might have compensated, at least in part, for wartime frictions? We identify at least four firm-level mechanisms. The first is increased female participation: many women have taken on traditionally male roles (from mining to truck driving). To some extent, older people and people with disabilities are also playing a greater role. The second is the spread of remote working, which has allowed displaced persons and refugees to stay connected to their employers in Ukraine and continue to provide services despite the physical distance. The third is greater contractual flexibility: the minimum wage did not increase during the war and inflation eroded its real value, widening firms’ margins for adjustment. Martial law also removed some restrictions on the employment of women in heavy work. Fourth, the gap between wages offered by companies and wages demanded by workers seems to have narrowed, facilitating agreements.

Implications and priorities, in wartime and for the reconstruction

What challenges are ahead in case the war continues? Shortages of workers are emerging in many sectors of the economy, notably for skilled workers. Wages for these workers are increasing but not by enough to match their aspirations. A continuation of the war will necessarily require a higher mobilisation in the labour market of persons so far inactive and a greater contribution from those who have left the country. Remote working can help – it allows refugees to participate in generating added value to support the economy and, possibly, to prepare for a return when conditions allow. Domestically, the army will unavoidably need more personnel if the war continues. The adoption of less labour-intensive military techniques should be encouraged as much as possible. Yet conscription will remain essential for national defence. While strategic considerations must obviously take precedence, incorporating labour market evidence into mobilisation policy design may help reduce its economic impact.

How can Ukraine prepare for the challenges of reconstruction? We identify six priorities. The first is reintegrating veterans with targeted subsidies, hiring incentives, and a psychological support network. The second is investing in education. The pandemic and war have damaged Ukraine’s human capital; rebuilding schools, supporting teachers, and funding remedial programmes will be crucial. The third is maintaining high participation among women, the elderly, and people with disabilities through inclusion policies and support services. The fourth is strengthening active labour market policies to facilitate reallocation between sectors and regions, with specific interventions for the most exposed areas, to prevent entire regions from being left behind. The fifth is policies to bring refugees back to Ukraine, to maintain strong connections with expatriates who have settled abroad, to simplify immigration into the country for foreigners, and to avert the risk of other workers wanting to leave the country. The sixth priority is managing the pressures on public finances generated by demographic decline, a permanent increase in disability and mental health needs, which will require resources and reforms.

Conclusion

Since February 2022, there has been a war raging on the front lines for four years, involving drones, soldiers, and missiles. And there has been a parallel war, perhaps just as decisive for Ukrainian resistance, being fought in the rest of the country – workers instead of soldiers, businesses instead of battalions. Holding the economic front, not just the military one. Factories that remain open, salaries that are paid, trade that continues, essential services that do not stop. Ukraine has held up well so far – the labour market has withstood shocks of unprecedented magnitude – but the challenges of reconstruction will be no less formidable than those of the war itself. The scars of war will be pervasive in the economy. Success will depend on investing in human capital, securing high employment among underrepresented groups, and strengthening the institutions that govern labour markets.

References

Anastasia, G, T Boeri, M Kudlyak, and O Zholud (2022), “The Labour Market in Ukraine: Rebuild Better”, in Rebuilding Ukraine: Principles And Policies, CEPR Press. (see also the VoxEU column here).

Anastasia, G, T Boeri, and O Zholud (2026), “A Wartime Labor Market: The Case of Ukraine”, RFBerlin Discussion Paper Series 10/26, forthcoming in Economic Policy: Papers on European and Global Issues 41(125).

Benmelech, E and J Monteiro (2025), “The Economic Consequences of War”, NBER Working Paper No. 34389. (see also the VoxEU column here).

Chupilkin, M and Z Kóczán (2022), “The Economic Consequences of War: Estimates Using Synthetic Controls”, EBRD Working Paper No. 271 (see also the VoxEU column here).

Federle, J, A Meier, G J. Müller, W Mutschler, and M Schularick (2025), “The Price of War”, forthcoming in the American Economic Review (see also the VoxEU column here).