Lyudmila Cherenko: The poverty rate is skyrocketing, yet people are not seeking social assistance.

The level of extreme poverty is increasing in Ukraine, but by the end of 2024, the worst forecasts of economists are not coming true, according to the Institute of Demography. In an interview with Doctor of Economic Sciences Lyudmila Cherenko, they discuss the salaries of Ukrainians, the shortage of workers and job vacancies, and whether benefits and payments will help bring refugees back from abroad.

The first year of war was a shock for the economy and the well-being of Ukrainians. However, later specialists realized that the country's economy had managed to hold steady. Although by the end of 2024 prices are rising for almost everything – both food and various services, and the market is facing a labor shortage, we will gradually return to "pre-war" levels in many indicators. However, it is very concerning that the level of extreme poverty is increasing.

This opinion is expressed by Doctor of Economic Sciences, head of the living standards research department at the Institute of Demography and Social Research Lyudmila Cherenko. In an interview with RBK-Ukraine, she spoke about whether Ukrainians became poorer in 2024, how salaries changed, and who among the refugees will start returning home first when the war ends.

– A year ago, you mentioned that for 2023 both macroeconomic indicators and salary statistics turned out better than expected, and the year ended unexpectedly positively. What can you say about 2024? Did your forecasts come true?

– Unfortunately, the forecasts regarding the war have not materialized very well. We hoped that by 2024 we would be more confident in the situation and could make economic forecasts based on the specific situation at the front line. But there is some good economic news now: the economy has not collapsed. The economy is functioning, and that is a significant plus.

One can argue a lot about how people behave as if there is no war in the country – they go to cafes, to theaters. In reality, this supports the economy. I’m not a military expert and do not know how this will affect the course of the war, but if people weren’t doing this, if we all donated to the war and shifted the economy to military rails, that would be a death sentence for the economy.

I always say: no economy – no country. We are interesting to our partners as a country as long as our economy is alive.

– If the economy had collapsed, how would people feel that?

– Even by clear economic criteria, it can be difficult to understand. Because there can be a sharp decline in GDP, but that does not mean a decline in the economy. It can recover in a year or two, and possibly even reach better indicators. In the history of our economy, there have been remarkable examples of rapid recovery. Even hyperinflation, when money loses its value, does not necessarily mean a death sentence for the economy.

Today, our partners are partially helping to compensate for the budget deficit; they are taking on some social expenses. But it is a different matter when the state budget is practically not filled by its citizens. What would indicate a decline in the economy? If people transitioned to a subsistence economy. We partially felt this in the 90s.

1Photo: If the economy had really collapsed, people would have switched to a subsistence economy and barter, – Lyudmila Cherenko

It would be if people began to rely solely on what they or their relatives could grow in their backyard. When households would not purchase all services but would perform them independently. That is, when everything reverts to a subsistence economy, people would resort to bartering.

As long as cafes are operating, people are going to cinemas, and service centers are open – all of this is a sign that the economy exists and functions. When there is an opportunity to provide jobs to others instead of producing everything within the household.

And this is indeed very good news. For such a large-scale war, by our estimates, should have hit us harder. For example, in the early years of the Russian-Ukrainian war (2014-2015 – ed.), poverty increased from 16.3% to 51.9%. One or two years of war, and we faced a threefold increase in poverty levels. The budget was practically empty. And this phase of the war is even more extensive, and one could expect much worse. We might have anticipated that poverty could rise to an incredible 80-90%. But that did not happen.

What do we have now? You know that the State Statistics Service has stopped all surveys (research – ed.) during the wartime, and we cannot find out from official statistics what is happening at the household level during these years. But at the end of 2023, with the support of UNICEF, the UN children's fund, a study of living conditions of Ukrainian households was conducted using a methodology similar to that of the State Statistics Service.

At the beginning of the full-scale war, in April 2022, we constructed three possible scenarios for the development of events, particularly regarding poverty forecasts. It turned out that by the end of 2023 we followed a scenario closer to the optimistic one. Between the average and optimistic.

The level of poverty based on incomes below the actual subsistence minimum increased by 1.7 times. It was 20.6% in 2021, and became 35.5% in 2023. This is, of course, a significant increase, but it is not as critical as it could have been during such a large-scale aggression against our country.

However, during the war, there was a significant increase in extreme poverty. The official subsistence minimum, which is included in budget calculations (in 2024, the subsistence minimum for working-age individuals is 2,920 UAH – ed.), we interpret as the extreme limit of poverty, the threshold of physiological survival.

In 2021, the percentage of people with incomes at that level was 1.3%. It was practically within the statistical margin of error. If it weren't for the full-scale war, we wouldn't have recorded this figure at all in 2023. But in 2023, the percentage of such individuals rose to almost 9%, a sevenfold increase.

This increase is primarily due to pensioners living alone with minimal pensions. It also includes individuals who have lost property, stable income sources, or homes, and those who have not yet managed to adapt to new conditions after experiencing losses.

– What needs to be done to reduce extreme poverty? Do these people need humanitarian aid?

– As far as I know, there is currently a lot of humanitarian aid available. Many international organizations are operating here, including the UN and others. They focus on delivering food packages closer to the frontline. They cover all the most dangerous areas of Ukrainian territory, where people either cannot buy anything because stores are closing, or cannot afford to do so.

2Photo: In 2023, nearly 9% of people found themselves below the extreme poverty line, a sevenfold increase

What could be done better at the state level? Of course, there are registries of housing losses, and there are compensation programs. All of this exists. But now frightening numbers are being reported about how many people are returning to occupied territories. This is primarily due to housing issues.

If the potential for providing at least temporary housing had been utilized at each municipality level, this wouldn't have happened. Even in the form of dormitories. Modern, equipped ones. The main problem of internally displaced persons is housing. Because even those who managed to find jobs and settle down still spend almost their entire salary on rent.

However, not everyone has managed to find employment, and not everyone is of working age. Many individuals are of retirement age. They are forced to return because they have somewhere to live there, while here it requires significant resources. Communities vary. There are small towns where no one wants to move, where it is hard to find work. This is rural areas. IDPs are trying to find a more or less large city where they can realize themselves in the labor market. And in larger cities, of course, the cost of living is high.

– How does poverty affect people's mental state?

– The psychological state during the war is difficult for everyone, regardless of their financial situation. In Kyiv, theaters are operating, apartments are being rented out, and there are many people in shopping centers. The same goes for the western part of the country. And despite the shelling in Kharkiv, life continues. Most likely, the majority of people are getting accustomed to everything, even to such situations.

In peaceful life, the probability of sudden death from an accident is relatively small. But in our conditions, if we are talking about Kyiv, Odesa, or Dnipro, that probability is higher. Yet life goes on, and we need to keep living. I see that most have adapted.

However