Executive summary

Labour migration is used as one of several responses to labour demand in certain sectors of the Korean labour market. Korea has an ageing population, a rapidly shrinking but unprecedentedly high-educated youth cohort, and a dual labour market with a large number of low quality jobs. Jobs in SMEs in the manufacturing sector are particularly unattractive to resident workers and hard to fill. Migration to Korea has grown in two decades, bringing the number of resident foreigners to about 3% of the population; in 2016, foreigners comprised 3.7% of the economically active population, below the OECD average. About half of all immigrants are from China, many of them arriving through work-visit programmes for ethnic Korean foreign nationals. The transition to permanent residence is high in this group. This review addresses the question of whether Korean labour migration policy ensures that international recruitment helps meet needs in the labour market which cannot be met locally. It examines key issues in the design of the Korean labour migration system, explores obstacles to labour migration for highly qualified foreigners and mobile global talent, and identifies where Korea can consider changes to make improvements.

Temporary foreign workers from other countries admitted for low skill jobs account for almost one in five foreign residents. One in ten Korean employers with five or more employees rely on filling some vacancies with foreign workers. To recruit from abroad for low skilled jobs, they must use the Employment Permit System, Korea’s temporary labour migration programme There were almost 300 000 workers under the programme in Korea in 2018, and about 50 000 incoming workers, making it one of the largest programmes among OECD countries in absolute terms and relative to the size of the labour force. The programme primarily serves SMEs in the manufacturing sector, where these workers account for 10% of total employment.

The programme design has a number of unique features. It is based on bilateral agreements with 16 countries of origin, who co-manage selection. Candidates must pass a Korean language exam to be eligible. From a roster, Korean authorities select a list of potential candidates for employers. This procedure has largely eliminated the rent-taking and worker indebtedness that plague similar programmes elsewhere. The programme is managed by the government at no cost to employers, offering regular follow-up and intervention; services to workers; and support for return.

Safeguards for local workers from competition and substitution effects lie in three mechanisms: annual admission quotas, which cap entries; a mandatory advertising requirement prior to recruitment; and the distribution of employment permits favouring employers who hire local workers. The quotas keep demand for workers higher than supply. The labour market test – vacancy listing – is relatively undemanding in international comparison. The penalty/points system for attributing workers needs to be evaluated to examine its effect on local hiring and retention; turnover is high among resident workers due to low wages and difficult conditions. Further, most foreign workers reach maximum overtime, while residents work fewer hours.

The cost of employment is not considered as a mechanism to favour recruiting locally: the programme is designed to supply workers at minimum wage for non-skilled work. Workers may not voluntarily change employers without employer consent, which limits their ability to bargain for higher wages even as their productivity increases or as demand increases. The definition of the programme as exclusively non-skilled is in possible contradiction with measures to improve the skills of workers. Selection of candidates has been refined over the years to favour better qualified candidates: 20% have tertiary-level qualifications and most incoming workers have certified skills. The maximum duration of stay in Korea has been increased from three to five to almost ten years, meaning that many workers acquire language and vocational skills which increase their productivity, without being able to bargain for higher wages. Increases in minimum wage may have important effects on the programme, reducing employer interest or increasing the demand for skills. Several restrictive windows have been put in place to allow the most productive, highest paid and most skilled workers to transition to a temporary renewable work permit, although most workers are unable to qualify.

Korea has modernised its migration policy framework to reduce barriers to recruitment of highly skilled foreigners. Professional employees of foreign firms investing in Korea are treated particularly favourably, and few restrictions apply to recruitment for skilled jobs: no labour market test applies, and access to permanent residence is possible through accelerated procedures, including a points-based selection for talent. Notwithstanding this openness and some high-visibility initiatives to subsidise top talent, Korea has attracted few highly skilled foreigners and has retained even fewer. Workplace culture and a highly competitive labour market for tertiary-educated represent obstacles. One channel for recruitment is international students, who are more likely to be adapted to the Korean labour market and culture and to remain. Korea has increased enrolment at a rate faster than the OECD average, in part to respond to falling youth cohorts, but only 2% of higher-education students are international students.

The permit framework includes more than 170 subcategories of admission, of which more than 100 allow different forms of employment, each with its own eligibility criteria and conditions for changing status. The current division of permits into “professional” and “non-professional” categories means that many medium-skilled jobs are not labour market tested, although there is a list of authorised occupations.

In summary, the existing framework for labour migration has been successful in providing substantial labour input to a specific segment of the labour market in several sectors of the Korean economy, resolving many of the problems common in temporary labour programmes. However, it could be improved, including to adapt to changing skills demands in the country and profiles of labour migrants.

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