Ukraine’s bid to keep tech workers happy
Despite major inflow of remittances, some Ukrainians see migration as a threat to the country’s future. Kyiv is trying to sweeten the situation for IT workers in hopes they’ll stay home.
By Emil Filtenborg and Stefan Weichert
1 March 2021
Dmytro Popovych is 29 years old, an ambitious developer who moved to London from Kyiv to advance his career. Unlike many young Ukrainians, he did not move abroad in search of a higher salary.
He is actually not earning much more than what he used to make in Kyiv, because Ukraine’s income tax rate for IT workers is just 5%. In comparison, income taxes range from 20% to 45% in the United Kingdom, depending on how much you earn, and the living costs are much higher. Popovych moved because the opportunities for advancement were more appealing in England.
“I am planning to have kids two to three years from now. I want to explore different countries and cultures before this happens,” Popovych says. “I also want to learn more about different aspects of IT, and then I might eventually come back and live and work in Ukraine. Still, for now, the opportunities abroad are a priority.” He’s moving on to a new position in the U.S. soon and is considering starting his own business in the future.
More than 200,000 people are employed in the Ukrainian tech sector, and the demand for IT workers outpaces the number of new graduates. The Ukrainian IT sector, which is growing by around 20% per year, according to a 2019 report, is better off than other industries because of its higher salaries, but it’s not spared from brain drain. The Ukrainian government is trying to keep new graduates in Ukraine with offers of a low 5% income tax, lighter paperwork and better legal protection. But it might not be enough.
Since the collapse of the Soviet Union, Ukraine’s population has dropped by 28%. Some leave temporarily, while others relocate permanently, seeking a better life with higher salaries and more stability. According to the World Bank, 10.3% of Ukrainian GDP in 2019 came from remittances from citizens working abroad — a total of $15.8 billion, making it the biggest recipient of remittances in Eastern Europe.
Despite the massive remittances migrants contribute to the economy, the government believes people can contribute more at home. Former deputy prime minister Gennady Zubko called migration “one of the greatest threats facing Ukraine” back in 2017, despite it being a big source of revenue. A national survey from 2019 showed that Ukrainians at large also view emigration as the country’s biggest threat.
Popovych, who sends money home to his parents a few times a year, does not see why emigration is such a big issue. “I also don’t understand why it is so bad that we leave the country,” he says. “I mean, I understand that it means fewer taxes, but it is natural. You cannot lock people in the country. People will see new opportunities and experiences, and who knows? Maybe they will come back with more money to invest.”
The country’s population is 37.3 million, a decline of 28% since 1990. Ukraine received $15.8 billion in remittances in 2019, equal to 10.3% of its GDP and the most in Eastern Europe. The minimum wage is 5,000 hryvnias per month ($178).
In search of a better life
Most of the people who leave Ukraine are low-paid laborers who can earn much more in the EU or Russia. But the Ukrainian IT sector is still affected by emigration, despite having competitive salaries. Tech workers are in demand, and they can do their work from anywhere in the world.
Living near Ottawa in Canada, 32-year-old Ivan Tachenko doesn’t plan to ever return home. While he could afford a comfortable upper-class life in Ukraine with private school for his children, private healthcare and money for travel, Tachenko feels the country is not stable enough.
In his lifetime, he has experienced two revolutions and a war in Ukraine, which makes him worry about the safety of his two children, the younger of whom has Canadian citizenship. Tachenko isn’t alone: In the past decade, 3.8 million Ukrainians have left the country and not returned.
“It was a tough decision to leave Ukraine and our parents behind. Your connections with them become thinner and thinner, but they understand when I say that I want a better future for their grandkids,” Tachenko says. “In Ukraine your door is thick steel, and you buy specific locks. In Canada, I can have a glass door and don’t even have to lock it every time.”
Tachenko sends money home to his father in Ukraine whenever he needs it. The salaries for developers in Canada range from $3,000 to $8,000 per month, while tech worker wages in Ukraine range from $800 to $4,500 per month — the minimum wage in Ukraine is less than $200 per month. Local salaries are paid in Ukrainian hryvnias while international workers are often paid in U.S. dollars.
But in Canada, the cost of living is much higher. According to numbeo, a three-course meal in Kyiv will set you back about $25 — it would be about $63 in Ottawa. A draft beer in Ottawa costs about $5.50, while a local beer in Ukraine costs less than $1.
An attempt at retention
The government hopes that by providing more benefits, keeping tech workers will help slow Ukraine’s population decline. At its peak in 1991, Ukraine’s population was nearly 52 million, but in 2020 it was just 37.3 million, a decline that officials blame on emigration and low birth rates.
In the fall of 2020, the Ukrainian government launched Diia City, an initiative to attract IT companies and entice tech workers to stay or even to come back home. Diia City is not a physical city but a legal framework for the IT industry, which had previously been almost unregulated.
“Developers don’t leave the place where it is bad but move to the place where it is good. Diia City is aimed to create these very conditions in Ukraine. Firstly by introducing new employment terms (gig contracts) into legislation, this will simplify hiring developers by Ukrainian companies,” says Alex Bornyakov, deputy minister at the Ukrainian Ministry of Digital Transformation. “Those who already work abroad will be able to return to more attractive conditions in their homeland and will be valued, even more, having foreign experience and contacts.”
“But the most important thing is that we care about their future because the majority of them are young people and at 20 to 30, this is when you want to make sure that the government will take care of them and they get as much social support as other people. That’s the whole point,” says Bornyakov, referring to the fact that many IT workers today do not have social support such as parental leave as other sectors do.
Dmitry Denisov is 30 years old and works as a software developer in Kyiv, mostly for foreign companies. He knows that some Ukrainians are leaving to seek a better life, better social protection, better schools, more equitable healthcare and cleaner cities, but he likes living in Ukraine.
“I had some thoughts about leaving, but every time I try to make a list of pluses and minuses, I have decided to stay. It is cool to receive a European salary but be in Ukraine where prices are much lower,” Denisov says. “IT workers can work everywhere around the world, and I hope that the government will not change too much. Because in most cases, new laws add new taxes, and it is rare for an industry to have so many privileges as the Ukrainian IT sector.”
Issue 1: Lifelines