The labour market integration of displaced Ukrainians: Insights from the EU and Austria

by Leila Hadj Abdou, Anna Amman, Saskia Heilemann and Martin Stiller

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Support for Ukrainians remains high three years into the war, with 84% of Europeans continuing to welcome them, according to a recent Eurobarometer. However, research on public attitudes shows that effective management of the situation is crucial to maintain this support. A key in that respect is successful labour integration.

In this post we discuss this important issue of labour market integration of Beneficiaries of Temporary Protection in the EU, and use Austria as a illustrative case study to delve deeper into the issue, exploring dynamics that can shape labour market participation of displaced persons.

Labour market participation is key for integration

Work allows for economic self-reliance, provides opportunities to develop and strengthen language skills and promotes general well-being. Labour market integration of refugees can also have important positive effects on economies of host countries. Another positive but often ignored aspect of labour market integration is its impact on displaced persons’ countries of origin. While at work in host societies, displaced persons accumulate knowledge and experience, as well as savings, that can eventually be transferred to rebuild their countries of origin, complementing reconstruction aid from the international community.

Labour participation rates differ significantly across the EU

As Beneficiaries of Temporary Protection, Ukrainian refugees have access to the labour market across the EU. A newly released report by the European Migration Network (EMN) and the OECD, however shows that labour participation rates of Beneficiaries of Temporary Protection differ significantly across EU-Member States, ranging from over 60% to below 10%. These variations stem, among others, from differences in general labour market conditions, the specific demographics of displaced Ukrainians, the level of support provided, as well as the existence of pre-established Ukrainian communities in the respective host country. (It should be noted that some differences in the observed labour market outcomes are also linked to disparities in data collection).

The Austrian case

To better understand the complex phenomenon of labour market integration of Beneficiaries of Temporary Protection, Austria serves as a particularly interesting case for two reasons: One, Austria has a history of pioneering temporary protection, welcoming large numbers of refugees from Bosnia and Herzegovina following the civil wars in former Yugoslavia. Furthermore, Ukrainian Beneficiaries of Temporary Protection in Austria have higher levels of education compared to co-nationals fleeing to other countries, which is often seen as a facilitating factor in terms of labour market integration.

History of successful temporary protection

In response to the displacement of persons from Bosnia and Herzegovina in the 1990s during the Yugoslavian civil war, Austria established a temporary protection system, which was characterised by relatively favourable labour market conditions and integration support for displaced persons, and eventually transitioned into permanent residency. Consequently, in just thirteen years after the arrival of Bosnian refugees in Austria, they were already indistinguishable from natives regarding their labour market outcomes, showing better labour market integration outcomes than in other European countries. This suggests that by eventually providing refugees permanent residency status, Austria facilitated their long-term, sustainable integration.

Whether and if so, how to manage the transition from temporary to a more permanent status is also a key issue for Ukrainian Beneficiaries of Temporary Protection today.

Temporary protection & labour market access in Austria

The Temporary Protection Directive (TPD) which has been activated in response to the Russian invasion of Ukraine is a direct outcome of lessons learned from the displacement caused by the Yugoslavian civil wars. The major lesson of the 1990s of European States which encouraged the 2001 Directive is the need for a clear and organized policy approach that recognizes that EU asylum systems are not equipped or designed to deal with a sudden, very large increase in claims, and protecting persons from a war in a neighbouring country.

The TPD grants persons displaced from Ukraine a residence permit and access to education and the labour market.  Regarding the latter, Austria transposed the TPD into national law by granting the holders of an identity card for displaced persons the right to work, initially provided that they have been issued a work permit in line with the Act Governing the Employment of Foreign Nationals. Beneficiaries of Temporary Protection were thereby given preferential yet limited access to the labour market. From September 2022 to March 2023 the employment rate of Beneficiaries of Temporary Protection in working age increased from 15 per cent to 21 per cent in Austria, which was a notable jump compared to some other EU countries with smaller or no increase during this period. In spring 2023, the Act Governing the Employment of Foreign Nationals was amended to remove the requirement of a work permit and thus provided Beneficiaries of Temporary Protection with unrestricted access to the labour market. As of April 2023, when Beneficiaries of Temporary Protection were granted unlimited access to the labour market, the number of employed Ukrainian nationals increased further.

Despite this, the labour force potential of persons from Ukraine has not been reached. This spring (2024), the head of the Austrian employment office estimated that up to 20,000 Ukrainians who would qualify to work are out of the labour market and warned of an “inactivity trap”.

Factors facilitating/constraining labour market integration

As the above cited EMN-OECD report emphasises, there are several factors – from social networks to support measures – that can facilitate or constrain employment opportunities for displaced persons from Ukraine across the EU.

Long-term residence

One key issue that is closely related to labour market integration is also the prospect of long-term residence, and the transition into legal regimes other than TP.

In Austria, there has been an legislative effort to enable the transition of Beneficiaries of Temporary Protection into the Red-White-Red Card Plus scheme, which Austria uses for labour migrants. The proposal was adopted by the parliament in June 2024. The transition into this employment scheme will be possible from 1 October 2024 onwards, i.e. well before the again renewed temporary protection runs out in early 2026. However, given that this scheme is criteria-led, including certain income thresholds, and that persons need to already have been fully employed and insured in Austria for 12 of the last 24 months, it only covers about ten per cent of all Beneficiaries of Temporary Protection in Austria or according to government estimations 7.800 persons. Moreover, it does not address those that have not yet been active in the domestic labour market, or who are unable to become active.

In order to potentially allow more persons to stay in the country, in case there is a need to remain in Austria after the end of the Temporary Protection Status, an amendment to the Asylum Act entered into force in July 2024 which allows the federal government in the future to define conditions for issuing residence permits for displaced persons, that can deviate from the Settlement and Residence Act by means of a regulation. This deviation can include preconditions to be fulfilled under the Act, as well as the possibility to file applications in Austria instead of prior to entry. What this regulation would look like and how extensive it would be, remains unclear at this stage, and might stay off the agenda till the end of temporary protection approaches in 2026.

Social benefits

Debates in Austria, moreover, suggest that social benefit regimes matter considerably for labour market integration of displaced persons.

In some EU countries, social benefits for Beneficiaries of Temporary Protection fall within the basic social welfare package, which is also granted to nationals, while other EU countries use allowance schemes  similar to those applied to asylum-seekers, or have put in place dedicated allowances specifically for Beneficiaries of Temporary Protection. In Austria, social support services for Ukrainians under temporary protection are granted through basic care (‘Grundversorgung’), as is the case for asylum-seekers. However, this arrangement has several issues that NGOs, civil society organizations as well as IOM, UNHCR and UNICEF have criticized, calling for a transfer of displaced persons into the regular social system: Under the basic care scheme, if displaced persons work and earn over a certain threshold, basic care is reduced or discontinued, which also affects the possibility to stay in housing organized under this scheme. Taking up work can result in losing housing organized under the basic care scheme at day one of employment. In case someone would lose his/her job during probation period or cannot afford housing notwithstanding employment, this might lead to homelessness, as also the refugee coordinator of the national government has criticized.

In sum, fears of losing this basic care, and being barred from re-entering the basic care system in case the job prospect does not work out, has been regularly cited as a reason for Beneficiaries of Temporary Protection to not take up employment in Austria.

Conclusion

Comparative analyses, like the recently published EMN-OECD report on labour market integration of Beneficiaries of Temporary Protection are important to understand labour market integration outcomes of Ukrainians in Europe. The Austrian regulation and the surrounding debate about drivers limiting labour market integration of Beneficiaries of Temporary Protection, moreover, indicate that it is vital to analyze social support arrangements and to explore their effects on employment.

In an era of ongoing conflict and displacement and in times of peaking labour shortages, exploring drivers of and pathways towards successful labour market integration seems more relevant than ever.

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Leila Hadj Abdou is the Deputy Head of the Policy Research and Migration Law Unit of the IOM Country Office for Austria; she coordinates the EMN Austria research activities. Previously she was a part-time Assistant-Professor at the Migration Policy Centre.

Anna Ammann is a Research Associate of the Policy Research and Migration Law Unit of the IOM Country Office for Austria.

Saskia Heilemann is the Head of the Policy Research and Migration Law Unit in the IOM Country Office for Austria, and is in charge of the overall coordination of EMN Austria.

Martin Stiller is a Legal Associate of the Policy Research and Migration Law Unit in the IOM Country Office for Austria.