Chapter 3. Low-skilled labour migration in Korea

Bilateral agreements

The recruitment process for the E-9 visa starts with the Ministry of Employment and Labour signing Memoranda of Understanding (MOUs) with governments of sending countries. Since the EPS was launched, the government has signed the MOUs with 16 partner countries to import workers (Table 3.1). The partner countries are Bangladesh, Cambodia, China, East Timor, Indonesia, Kyrgyzstan, Mongolia, Myanmar, Nepal, Pakistan, Sri Lanka, Thailand, the Philippines, Uzbekistan and Vietnam, and PDR Laos. The government bodies in these countries are directly involved and responsible for the selection and admission process of the foreign workers to guarantee transparency and fairness.

The largest supplier of labour force to Korea since the programme began until 2018 is Viet Nam, followed by Thailand and Indonesia. In terms of the number of active participants, in 2016 Viet Nam was the first, with 14.5% of all permit holders, followed by Cambodia (13.5%), Indonesia (11.5%) and Nepal (10.6%).

While the contents of the bilateral agreements are confidentially negotiated and not disclosed, there is no indefinite commitment to receive nationals of the participating countries, nor is there a fixed annual quota on admissions from any partner country. This gives Korea some leverage to ensure compliance with programme regulations, quality control and to react to spikes in overstay by workers from individual partner countries. Since the introduction of EPS, recruitment has been suspended from certain countries due to concern over illegal overstay among nationals from these countries. This was the case for Viet Nam in 2013, for example. Since origin countries consider the possibility to deploy workers to Korea as very desirable, recruitment suspensions have led origin countries to strengthen integrity measures in order to restore the bilateral recruitment mechanism. Measures taken by origin countries to improve compliance have included, for example, suspending access to EPS in regions where high overstay rates have been noted. Measures taken by Korea have included disqualifying relatives of overstayers from eligibility for EPS.

Most EPS partner countries deploy temporary workers to a wide range of destinations in the Gulf Countries and among Southeast Asian developed economies, with flows to Korea comprising only a small share of total deployment (OECD/ADBI/ILO, 2018[2]). In 2015, Korea was the destination for fewer than 2% of workers deployed from Nepal, and 10% of workers deployed by Viet Nam. Yet wages are much higher in Korea than in other destinations, and fair recruitment means that workers pay much lower fees for recruitment and are able to remit a larger share of their earnings to their families, making EPS one of the most attractive programmes for partner countries and workers.1

Annual quotas by sector

The Foreign Workforce Policy Committee (FWPC) under the Prime Minister’s office, an interministerial working group, determines the inflows of low-skilled foreign workers, including the ceiling on the total number, industry of employment and countries of origin every year.2 Before the FWPC is held, the Foreign Workforce Employment Committee in the Ministry of Employment and Labour previews the agenda brought to the FWPC. A “Working Committee for Policy on Foreign Human Resources” under the FWPC meets prior to the FWPC. The “Working Committee” comprises up to 25 representatives of social partners (employees and employers), public interest members such as NGOs, and high-level government officials responsible for foreign worker issues. It is chaired by the Vice Minister of Employment and Labor. This “Committee” functions as a consultation mechanism in determining policy, including quotas. Following input from this committee, the FWPC examines demand from employers and considers the need to protect resident workers, as well as the overstay rate of foreign workers of sending countries. In general, the quota is set after subtracting the number of returning workers and adding the estimated number of additional manpower in need. The FWPC also decides the permitted work sectors which can hire foreign workers with an E-9 visa. The main sector which receives employment permits is manufacturing (Figure 3.2).

Figure 3.2. Annual quotas have largely favoured the manufacturing sector

Annual admission quotas for E-9 visas programme, 2004-18.

Note: Returning workers have been admitted since 2012 with sector assignment. “Flexible” workers may be allocated to sectors during the year depending on demand.

Source: Ministry of Employment and Labour.

The quotas have varied from year to year, with a sharp cutback in 2009 with the global financial crisis and the drop in employment. Since 2011, admission numbers have been fairly stable. Since 2011, returning workers under the two provisions for returns have been included in the quota, with a certain set-aside based on the expected number of returns under the “diligent worker” provision, and with a ceiling placed on re-admission based on the advanced Korean language test. Since 2014, a small part of the annual quota has been kept in reserve to allocate to sectors where demand is particularly acute during the year.

Demand has historically been higher than the quotas, so that not all employers receive work permits. In the agricultural sector, for example, applications stood at 26 000 in 2014 and rose to 29 500 in 2016, compared with about 6 000 permits authorised under the quota.

The TOPIK language test

The second screening criteria for foreign candidates is the Test of Proficiency in Korean (TOPIK) for the EPS. TOPIK is a standardised Korean language test, based on levels of proficiency, developed by the National Institute for International Education (NIIED) in 1997 as the benchmark assessment of language skills. When a language test was added to the EPS system in 2005, the basic existing TOPIK level was not appropriate for the non-professional jobs targeted under EPS, requiring the development of a new test. The EPS-TOPIK evaluates Korean language proficiency and understanding of Korean culture. The questions consist of 25 listening questions and 25 reading comprehension questions. They evaluate basic understanding of the Korean society as well as ability to communicate job responsibilities and industrial safety.

The TOPIK result is the basic threshold for eligibility for EPS; applicants must score at least 80 points out of 200. Among the applicants meeting the threshold, the Human Resources Development Service of Korea (HRD Korea) selects the top scoring.

HRD Korea is in charge of all the practical affairs including implementation and registration of TOPIK. The local branches of HRD Korea in partner countries collaborate with public organisations (sending agencies) to operate the examination. The sending agencies publicise the upcoming test on their websites and in local newspapers. Applicants selected through a pre-registration screening process can register for TOPIK online or in person at designated sites; the registration fee is about 24 USD. The test consists of listening and reading parts in the form of multiple choice questions. In preparation for the exam, HRD Korea provides open question books to the applicants explaining about EPS and showing the sample questions of the test. The book and audio files are available on the EPS-TOPIK website. However a large number of applicants take Korean language classes in private institutions. From 2007 to 2017, more than 1.7 million applicants took EPS-TOPIK in the sending countries, far more than were admitted to EPS. Most applicants to the test are men; the pass rate in 2017 was 24.3% (Table 3.1). The pass rate varies between countries and has been higher in the past (32.5% in 2013, for example) but has never exceeded 50%.

The TOPIK result is valid for two years. Passing applicants submit their EPS job application and other required documents to sending agencies as long as the TOPIK result is valid.

Korea is unusual in requiring that candidates for migration submit to a language test. Most OECD countries do not require low-skilled temporary workers to pass a language test. Given that the employment period is for several years, and that workers will be placed in small firms where they will not be able to work without speaking Korean, the test is essential for the success of the programme.

For applicants, the investment in the language test is significant in terms of time, and sometimes in terms of financial expenditures. The TOPIK is also indirectly a screening for the ability of candidates to work with modern technology, since test preparation requires not only basic literacy but also competences in using computers and on-line testing applications. The shift to computer-based testing also ensures that the candidates who pass the test are able to interact with modern user interfaces.

The willingness of candidates to invest in studying for the TOPIK, in light of the low pass rate and the fact that even successful candidates are not assured a place in the EPS, indicates the high value of the programme for workers in origin countries.

The points system for selecting EPS workers

A further innovation in the recruitment system was the introduction of a points system for selection of EPS workers. In the first years of the EPS, selection on the basis of TOPIK scores and qualification on the basis of physical strength was considered sufficient. However, in the pool of TOPIK test participants, some candidates had specific and relevant experience in the fields for which they were applying - especially manufacturing and agriculture - which were not taken into considered. Even if they passed the TOPIK, low scores excluded them from consideration. The points system was introduced in 2014 to allow prior professional experience to be taken into account. For all candidates who pass the TOPIK, and who have specific skills, it is possible to undergo the skills test. Points are given for skill level, work experience, training, qualifications and job capacity. Candidates who only take the Korean language test may score up to 200 points. Candidates who pass the test and take the additional skills test may score up to 100 points for Korean language, 100 for skill levels and 100 for work experience, training and qualifications. The roster takes the top scoring candidates. The system has proven very popular: in 2016, 90% of applicants took the additional skills test (Park and Kim, 2016[5]). As a result, the roster now includes candidates with lower Korean language skills but with specific experience or qualifications. The EPS workers entering from 2017 are therefore better qualified than those who came under the pre-points system.

Building the Candidate Pool and selecting candidates

In origin countries, the basic eligibility requirement is age, between 18 and 39 years of age. The age requirement is, in Korea as well as in other countries, one of the paradoxes of labour migration: countries with age-discrimination legislation for employment of resident workers apply discriminatory policy to the selection of labour migrants. Age is sometimes a factor in ranking and selection of applicants for permanent economic migration (OECD, 2014[6]). The logic for permanent migrants is based on the lifetime contributions expected from immigrants. Temporary workers whose stay is linked to their employment are less often subject to age requirements. For example, there is no age requirement for temporary seasonal workers in Canada or New Zealand.

The sending agencies translate, check and approve the job applications. The government bodies in the sending countries compose a roster with about 2.5 times the applicants of the designated national quota, based on the profiles and TOPIK scores, and provide the rosters to HRD Korea. This allows the Korean authorities to choose candidates based on their characteristics, and prevents anyone in the sending country from determining who will be chosen. As a result, EPS represented a sharp decrease in recruitment costs, which have generally fallen below 1 000 USD, excluding the time spent preparing for the TOPIK exam. Recruitment costs for workers under EPS are very low (Box 3.4).

Candidates are drawn from the roster by the HRD Korea based on the preferences of employers in different sectors, by gender, nationality and age. This means that not everyone on the roster can make it to the pool. In practice, younger male workers of certain nationalities have higher chances to be chosen as candidates.

According to a 2014 MOEL survey of employers, the leading category of preference was nationality (39%), followed by skill (17.4%), gender (11.9%), Korean language level (9.9%), age (8.3%) and physical condition (7.8%). It may be that the selection process addresses the latter three characteristics effectively, by excluding workers with poor physical condition, age above 40 and no language ability, allowing employers to focus their preferences on characteristics not filtered by EPS selection in 2014.

The selection has favoured young candidates (Figure 3.3). Among the candidates who are admitted to the roster for selection, firms tend to pick a younger population of workers. The age limit for admission is 40 years, but 2% are over 40 due to being re-employed after an initial spell.

E-9 participants are fairly well-educated, given that the programme is for non-professional work. In 2013, an analysis showed that 20% of those selected and admitted to Korea had tertiary level education, 60% at least secondary, and only 20% less than secondary. This higher education level has important implications for their eventual prospects to remain in Korea, since the limited bridges to other visa categories depend in some part on their education level.

Applicants to EPS are mostly men, but selection leads to a smaller share of women among those admitted to Korea. In 2013, 11.8% of test-takers were women, and 11.9% of passers were women. 16.4% of those admitted to the roster were women. Fewer than 10% of those admitted were women in 2013, and by 2016, only 8.6% of the E-9 visa holders in 2016 were women, however.

Figure 3.3. Most EPS workers are very young

Age distribution of primary applicants for EPS, 2005-09 and 2010-15, new permit recipients in 2015, and employment in Korea.

Note: Primary applicants are EPS-TOPIK passing candidates (not re-entering workers).

Source: Ministry of Employment and Labour, Korean Statistical Information Service.

The labour market test

In Korea, there are two steps for employers who wish to hire workers under EPS: first, submit to a labour market test; second, compete for the limited number of employment permits offered under the annual quotas.

Employment Permits are issued pursuant to a labour market test, which takes the form of a mandatory publication of the vacancy at the public employment centre (Job Centre). When EPS was first set up in 2004, the minimum duration of the listing was set at 30 days. In 2005, this was reduced for certain sectors (identified by the Ministry of Employment) to just seven days listing, or three days if the listing was also posted in newspapers and television). Employers can begin the process by applying for the Employment Permit at Job Centres only after having failed to find a Korean for the job. From 2010, the general requirement was reduced to 14 days. For active media advertisements (TV, magazine or newspaper) for seven days, the Job Centres are likely to authorise the request to hire foreign workers. Job Centres may send local candidates for consideration by the employer. If employers twice refuse to hire candidates the Job Centre deems suitable, the Job Centre may reject the employer’s request for an employment permit for a foreign worker. In practice, the labour market test is nominal, with very few cases of rejection of applications due to failure to hire locally.

In comparison with other OECD countries, the EPS labour market test is relatively short in duration (Figure 3.4), although the requirement to hire workers referred by the Job Centres is on the stricter side of labour market tests. This discretionary mechanism depends on the jobseekers enrolled with the Job Centre and the willingness of caseworkers to consider jobseekers suitable for the jobs advertised. Caseworkers can insist on sending older workers, or workers of a different gender than those preferred by employers, for example. In practice, however, the increasingly segmented labour market for foreign workers is reflected in the predominance of vacancy listings at Job Centres for foreign workers.

Figure 3.4. Korea’s advertising requirement is within the range of most OECD  countries

Duration of the advertising period in the labour market test for temporary non-skilled labour migration permits, 2017.

Note: Where countries have varying durations for different visa/permits, the lower end of the range is used. For instance Germany takes up to 14 days for seasonal work, Spanish Seasonal Work takes 25 days and Finland 2-4 weeks for low-skill work. In some instances, numbers denote the average days used in practice as in New Zealand. Australia, and Denmark have no fixed duration. Estonia, Greece, Israel, and Mexico have no LMT.

Source: OECD Secretariat.

Employers are able to file on-line. At first, prospective employers were required to visit government-designated employment support centres to request state permission to employ foreign workers under EPS. However, starting in 2009, employers have been able to use an online registration system.

Firm-level limits to the number of workers

A firm-level limit applies to employment of E-9 workers (Table 3.3). Businesses were originally limited to 20% of their workforce being comprised of E-9 workers; this was raised to 30% for businesses with fewer than 10 employees, and a bonus E-9 worker was allocated to firms with fewer than 50 employees in “root industries”3. At present, small firms in particular are authorised to have high shares of E-9 workers. Notably, in the manufacturing sector, the limit has increased in firms with 50 employees or less since the introduction of EPS. Firms with six to ten employees and firms with 31 to 50 employees were originally allowed to recruit maximum five and ten E-9 workers respectively; however, the firms now can employ additional two E-9 workers. The threshold leads to some anomalies, such as firms with 11 employees authorised to have 90% of their employees on E-9 permits, while firms with 10 may only hire five E-9. For small firms wishing to increase their E-9 workforce, it may be worthwhile to expand employment of other workers when applying to EPS, in order to qualify for a higher allotment.

Foreign workers employed under other permit categories (e.g., H-2, E-7 or F-4) do not count against the E-9 firm limit, so that a firm can employ as many foreign workers as it wishes, as long as the E-9 visa-holders do not exceed the statutory limit. Layoffs of employees which occur after the E-9 worker is authorised are not necessarily reported to HRD Korea, so the share of E-9 workers may exceed the limit due to layoff of other workers, and not be detected until subsequent applications for E-9 workers.

Points-based system for employers

Since 2012, employers must not only labour-market test vacancies but also score on a points-based workforce allocation system in order to obtain employment permits. Previously, employers were served in a first come, first served order, with employers physically queueing outside of government offices. Under the points-based system, all applications are scored, and the top-ranking are issued permits until the quota is exhausted. Further, since permits are issued during the course of the year, employers with higher scores receive permits earlier, while those with lower scores may have to wait longer. The points-based system includes a number of limits which were already present in the distribution of employment permits.

The initial application is filed with an employment centre, which checks if it meets the basic eligibility (labour market test, sector restrictions, firm size, etc.). The employment centre sends approved requests to the KEIS, which scores the application and awards employment permits three times a year. KEIS informs the employment centres, which then notifies employers by text message that they have been awarded employment permits.

The points system comprises three elements: basic requirements, bonus points, and penalty points (Table 3.1).

Basic items in the points system provide a minimum of 77.8 out of 100; bonus points for good practices in programme bring up to 7 (2.7 for manufacturing) points, making the effective range from 77.8 to 107 (102.7 for manufacturing).

Penalties are imposed for violating the regulations of labour law and EPS regulations, for a workplace fatality of a foreign worker, and for causing the departure of an EPS worker due to violence, abuse, harassment or failure to pay wages or other violations of workplace regulations. The maximum penalty is 12.3 points. Employers with many penalties for having lost workers due to abuse may still rank high enough to receive workers if their labour shortages are acute and they score high enough on the basic characteristics of labour demand.4

The attribution of points has changed since the system was first introduced in 2012. The most significant changes occurred in 2014. The number of points for hiring Korean workers was increased sharply; originally there had been little difference between firms hiring no Koreans (18 points) and those hiring six or more (20 points). This changed to 14 points for no hiring and 20 points for those hiring three or more Korean workers. Another change was to offer more points to firms requesting a large number of foreign workers; this was taken as a sign of labour needs, rather than of dependency on foreign workers. Bonus points for quality housing and for offering workplace training were increased for all sectors but manufacturing, to provide agricultural workplaces especially an incentive to improve working conditions.

Penalties for mistreatment and abuse of workers were increased, although employers who have committed such abuses are still allowed to recruit foreign workers if they score high enough.

The introduction of these changes led to the exclusion of many employers in 2014, and to the first time in which the quota was not entirely used due to insufficient eligibility of firms for employment permits.

Employer selection of candidates

Employers who have been approved following a labour market test and have been assigned an employment permit are contacted by the Job Centres. Job Centres provide employers a list of qualified candidates; Job Centres give up to three opportunities to employers to choose among EPS candidates. After receiving the list, the employers review the applicants and select based on the provided information on their eligibility and competence of candidates. Once the decision is made, the employer provides an employment contract to the selected applicant. The work contract must contain working conditions including salary, working hours, workplace and holidays. At the final stage, the employers apply for Certificate for Confirmation of Visa Issuance to the Ministry of Justice. When this certificate is sent to the origin countries, the selected applicants receive a working visa at the Korean Embassy. The duration from the start of the process to the arrival of the worker is about four months; given the size of SMEs, variations in labour demand are often related to a sudden contract, requiring workers quickly.

Arrival in Korea and placement in the firm

Workers receive some additional training in the origin country prior to departure: 38 hours of Korean language and seven hours of Korean culture.

Small groups of EPS workers arrive throughout the year. As soon as the workers arrive in Korea, they are met at the airport (flights generally arrive in the early morning). They participate in employment training sessions prior to employment, for three days, including language, the EPS, labour law and relevant information for daily life and for compliance with the obligations of EPS. The technical content of the training courses is determined by the federations of employers. There is also a health examination prior to placement in the firm. At the end of this three-day training, employers pick up the workers.

Many employees live in company dormitories. In 2015, more than 90% of workers had housing provided by their employer; of these, two-thirds of employers paid their housing costs entirely (Seol and Ko, 2015[9]).5 The need to provide separate dormitories for men and women is one explanation for the employer preference for male workers. Employers of one or two workers may rent private accommodation for their workers. The rent paid by workers for employer-provided housing is not regulated by EPS and is subject to private contractual agreement between workers and employers.

During the stay in Korea

All workers arrive with an initial three-year contract. Three months after arrival, there is a follow-up by telephone to check on the adaptation of the worker. In some cases, there are issues which emerge in the workplace: employers may find that the work doesn’t have the physical strength expected, and employees, many of whom are highly educated in their home country, may have difficulty adjusting to the low-skill job. These issues are mediated by local HRD offices. Workers or employers may request additional training during the stay in Korea, which is provided by the local HRD office; these trainings are paid for by public funds directly to training agencies. Courses are generally short, and held on weekends; this is also a means to keep workers engaged when they are not busy at work. HRD checks with firms twice a year.

To serve foreign workers, the Ministry of Employment and Labour has established nine regional Support Centers for Foreign Workers. These are funded by the government and operated by NGOs.6 The centre offers in-person and telephone support in multiple languages, primarily to E-9 and H-2 workers. Centres offer courses, including Korean language classes and certification. They also organise cultural and sport activities, and in some centres, a medical clinic. HRD Korea also maintains a call centre which serves employers and operates offices around Korea, as well as a pool of interpreters.

After three years in Korea, employers decide whether they wish to extend the contract of the worker for an additional 22 months.

The preparation for return is built into the system. Workers are contacted by direct mail three months prior to return (six months prior to 2018). Two months prior to departure, HRD contacts the worker to provide information on how to recover contributions and benefits, and to propose pre-return and post-return training, the latter supported by HRD in the home country. Contacts with Korean firms in the home country are also provided. Text messages are sent in the months before return. Prior to 2018, visits and consultations were conducted six months prior to return to propose services. From 2018, contacts are made two weeks before return with workers.

The entire process of EPS is funded by the Korean government with almost no costs borne by employers. Employers of foreign workers pay only for the pre-employment training expenses.7 There are some private agencies assisting companies with the procedures related to requesting foreign workers, and some training provided by employers is only partially reimbursed by HRD Korea, but these expenses are not substantial.

The insurance system for foreign workers

All workers in Korea are guaranteed basic labour right and are eligible for the same social insurance benefits and labour rights. Non-professional foreign workers (E-9 and H-2) are covered by four major social insurances within the same scheme with Korean workers: Industrial Accident Compensation Insurance, National Health Insurance (NHI), National Pension and Employment Insurance. Among them, all foreign workers and employers who employ them are subject to compulsory subscription to the first two insurances.

Industrial Accident Compensation Insurance applies to all business places that employ workers regardless of their nationality. The premium rate is decided annually at the end of the year, according to occupation category; the employer pays the entire premium. The Korea Workers’ Compensation and Welfare Service is in charge of overall management, application of insurance and collecting premiums. Foreign workers’ health-related risk is also subject to NHI, which covers the whole Korean population. Eligibility for workplace insurance is under the EPS, once employers submit qualification report of employees to the NHI within 14 days of employees’ taking up duty. Both employer and employee pay a premium corresponding to 3.035% (total 6.07% in 2015) of monthly salary. Neither E-9 nor H-2 workers are covered by health insurance when they are between jobs.

In agriculture and fisheries, individual employers are not required to pay health insurance or workplace injury insurance; in small enterprises, there is no disability insurance. Workers employed by individuals or small firms rather than pay the full contributions themselves generally choose not to pay into these schemes and are not covered.

Regarding the national pension scheme, the principle of reciprocity applies: foreign workers’ pension right in Korea would be guaranteed only if the same rule applies to Koreans who reside in their origin country. According to the bilateral social security agreement with sending countries of the EPS, E-9 and H-2 visa holders from eight countries out of 15 countries (China, Kyrgyzstan, Thailand, Mongolia, Uzbekistan, Philippine, Sri Lanka, Indonesia) are eligible for the National Pension benefit. Subscription is obligatory only for foreign workers from those countries and both employee and employer pay a contribution (4.5% of the average amount of monthly income). On the other hand, the principle of reciprocity does not apply regarding the lump sum refund, i.e. National Pension contributions allow cashing out when the foreign workers return to their country, even if the same regulation would not apply to a Korean.

Lastly, foreign workers under the EPS may voluntarily join the Employment Insurance in Korea; insured foreign workers receive unemployment benefits equal to those of native workers. An insurance contract is established by the employer applying to the regional employment centre if the employee wishes to be insured. The premium rate is 0.45% and 0.7% of monthly wage for each employee and employer. The Korea Workers’ Compensation and Welfare Service administers the Employment Insurance as well as Industrial Accident Compensation Insurance. Foreign workers and their employers who are covered by such an insurance policy are subject to each regulation.

The Act on Foreign Workers' Employment regulates mandatory subscription of foreign workers and their employers to four supplementary insurances, based on employment management and protection of the EPS workers: Departure Guarantee Insurance and Trust, Return Cost Insurance and Trust, Guarantee Insurance against Overdue Wages, and Injury Insurance.

First, the Departure Guarantee Insurance aims to have employer compensate superannuation to foreign employees who work more than one year in the same workplace. Subscription is the obligation of every workplace with more than one regular employee; however, employer of H-2 holders in the construction sector is exempt from this plan. As a premium, employees pay 8.3% of regular monthly wage on work permit contract every month and the foreign worker could receive it by reporting departure date to employment centre and applying to insurance company. The amount of insurance money substitutes for statutory superannuation by Guarantee of Workers’ Retirement Benefits Act. However, if the quantity of departure guarantee insurance does not satisfy that of Retirement Benefits Act, the employer should pay the difference to the foreign employee. Departure Guarantee Insurance accrues to the worker, but is forfeited to the employer in two cases: if the employee stays less than 12 months with the employer, or if the worker leaves the employer without justification. This is an unusual arrangement, not employed elsewhere in temporary labour migration programmes, in which the worker must compensate the employer if the contract is broken through no fault of the employer. The amount of the insurance, 8.3% of salary, is not a substantial amount at the beginning of an employment spell but adds up to one month salary at the end of a year, providing a strong disincentive for workers to leave their employer once they have spent some time at the workplace.

EPS requires foreign workers to pay return cost as soon as they arrive in Korea. EPS workers establish an insurance contract through the employment training centre and must pay the premium within the prescribed period. The premium varies according to origin countries, between KRW 400 000 and 600 000, and can be paid in up to three instalments within 80 days from the date of entry into force of the contract. Foreign workers face 800 000 KRW of penalty if they do not subscribe to the plan. The insurance guarantees that workers have the means to pay for their ticket home at the end of their employment.

In the case of accident injury or illness other than occupation accidents, foreign workers have an obligation to be insured to casualty insurance as well. Foreign workers subscribe to the plan through the employment training centre and pay premium immediately in cash. The amount of premium varies according to age and health condition of employees; indicatively, it is about KRW 9 100 per year for 30-year old men.

Lastly, foreign workers under the EPS are protected from unpaid wage through employer-paid Guarantee Insurance. Employers of a workplace with less than 300 regular employees or where the Wage Claim Guarantee Act is not applied are required to subscribe to this guarantee insurance8, which covers up to KRW two million of unpaid wage. The employer pays KRW 16 000 per year and per foreign employee to the insurance company. The foreign worker could make a claim on a wage to the insurer, in the case the employer delayed payment of wages. The employer could be charged of less than KRW five million of penalty if they do not follow the policy.

Departure guarantee insurance is returned to the worker within 14 days of departure. Starting in 2013, insurance benefits have been paid at Incheon International Airport, so that insurance benefits can be paid – without commission – upon leaving Korea.

Unemployment insurance is not compulsory for foreign workers (E-9 and H-2), although it is possible to sign up on a voluntary basis. Very few, if any, EPS workers pay into the UI system.

Framework for managing low-skilled labour migration in other OECD countries

The central objective of labour migration management in OECD countries is to “help meet those labour market needs which cannot be satisfied through tapping domestic labour supply in a reasonable time frame, without adversely affecting the domestic labour market”; (OECD, 2011[12]). The framework should include the following elements (OECD, 2009[13]):

• A means to identify unmet labour needs;

• Work permits in numbers commensurate with the extent of labour needs;

• Means for matching immigrant workers to jobs, either overseas or in-country;

• Efficient permit processing and delivery procedures;

• Means for employers to verify the status of potential employees;

• Effective border control and workplace enforcement procedures

Putting the framework in place requires a definition of “needs”, “reasonable time” and of “adverse effects”, three parameters for which there is no absolute measure. The policy settings in OECD countries reflect the range of interpretation of needs, timeframes and adverse effects. In particular, the latter often involves a trade-off between groups which may benefit from labour migration and those which may not.

Lower skilled jobs are seen in most OECD countries as relatively simpler to supply from resident labour due to the low barriers to uptake, and the risk of adverse effects of labour migration to these jobs as higher, due to potential complementarity with residents with low education. For this reason, most OECD countries have subjected labour migration for low-skill jobs – and by low-educated foreigners – to stricter control than migration for higher-skill occupations. Many have limited provisions for low-skilled migration in labour migration channels allowing indefinite stay (OECD, 2014[6]). Indeed, a skill threshold is one of the main constraints on labour migration channels in many countries (OECD/EU, 2016[14]). However, there are a number of OECD countries which do not apply a skill threshold to their labour migration schemes, but use a combination of salary thresholds, labour market tests, and/or numerical limits to govern labour migration (Table 3.5).

Although the main labour migration channel allowing potentially indefinite stay may be closed to migrants in low-skilled occupation, most OECD countries have some form of temporary or short-term channel open for less skilled labour migrants. Only a few OECD countries, as noted, exclusively have programmes offering limited-term stay to low-skill labour migrants.

Part of ensuring that there is no adverse effect on the local labour market is to ensure that the cost of foreign workers is at least as high as that of local workers. The labour market test usually takes into account the wage level offered to the foreign worker, benchmarked against a minimum, prevailing or collectively-agreed wage. Following admission, measures must be in place to ensure that the real cost of foreign workers does not fall below that of local workers. When foreign workers, who are already vulnerable due to lack of familiarity with the language and/or legal system of the country of employment, are further made more vulnerable due to their inability to change jobs or sectors, or dependence on their employers for housing, there is a risk of exploitation at a cost lower than that of local workers. To counteract that risk, compliance mechanisms include education and information, inspections (physical and virtual), and financial monitoring measures such as mandatory payments into local bank accounts.

Other measures can also be used to increase the cost of employment of foreign workers. One such measure is to impose and employment levy, or tax (Box 3.10). The idea of levies is one which has been discussed in Korea, and appears as a policy measure to explore in the Third Basic Plan, as a potential measure to “protect national jobs”. Levies have been discussed for some time, with the Foreign Manpower Committee raising this possibility for the first time in 2010, and again in 2012 and 2014, deciding each time not to impose one (KOSBI, 2016[15]). Unsurprisingly, employers have opposed levies, on the grounds that resident labour is not available (Noh, 2015[16]).

The 2016 Economic Plan of the Ministry of Strategy and Finance included the introduction of levies, but the proposal was also withdrawn. One proposal for levies was to limit application to firms which have employed many foreign workers for a long period, e.g., firms with more than 10 EPS workers employed for more than five years (Seol et al., 2015[17]). The objective of such a targeted levy would be to signal to employers that meeting firm-level long-term and structural labour needs is not the objective of the EPS. This signalling effect could be achieved through reducing the firm-level quotas for “dependent” employers (see Box 3.3). Whether this signal is necessary depends on whether EPS is seen as meeting temporary or structural needs.

Is the demand temporary or structural?

One of the key questions driving migration policy design is whether need for labour is structural or temporary. When demand is structural, and there is little complementarity with locally available labour, it is difficult to argue for a temporary labour migration programme if workers are likely to be in demand and remain employable indefinitely. Previous OECD recommendations have noted that temporary labour migration for permanent labour needs is a contradiction (OECD, 2009[13]).

In the Korean case, there is a clear demand, but whether it is truly structural is not evident. At present, demand exceeds supply of foreign workers. While vacancy listings at the PES (Worknet) are not mandatory in general for employers, and do not represent the bulk of all job vacancies, they are a requisite for any employer wishing to hire a foreign worker through EPS. Consequently, vacancy figures reveal both total and foreign vacancies registered through the employment centre by employers. PES in data in Korea, as in other OECD countries where PES listings are obligatory for labour market tests, overrepresent demand for foreigners. However, they do reflect the occupations for which employers wish to hire foreigners and which are covered by the EPS. Vacancy data suggest that there are some occupations for which employers hope to fill a large share of vacancies with foreign workers (Figure 3.7). This is true for agriculture forestry and fisheries (68.4% of vacancies are for foreign workers), but also for manufacturing and construction occupations. Management, accounting, and office work is the most demanded sector in absolute terms; however, few employers opened their vacancy for foreigners– perhaps because the employer or sector was not eligible for the EPS.

Figure 3.7. Vacancies for which employers seek foreign workers are concentrated in a few sectors

Vacancies by sector and share of demand for foreign workers in 2013.

Source: Worknet.

Overall, demand is very high for foreign workers. In 2013, there were almost half a million vacancies on Worknet where employers sought foreigners. Of these vacancies, most were for jobs with low qualifications and where the salary was between KRW 1 and 1.5 million per month, or between USD 900 and 1 335 (Figure 3.8).

Figure 3.8. Vacancies for foreign workers are for low-skilled, low wage jobs

Panel A. Education requirements for jobs for foreigners. Panel B. Monthly salary (KRW 1000) offered. 2010-13.

Source: Worknet.

Further, smaller firms are the ones which mostly try to recruit foreign workers (Figure 3.9). This is in line with programme design and with the strong labour demand among low-productivity SMEs. The growing number of requests from 2010 to 2013 involved firms of all sizes, but it was the smallest firms where demand grew more quickly at first. The bulk of demand in 2013 was in firms under 30 employees.

Figure 3.9. Foreign workers are mostly recruited by SMEs and micro-enterprises

Requests for foreign workers, 2010-13, by firm size.

Source: Worknet.

Demand for foreigners exceeds the ability of firms to find available foreign workers. Between one in ten and one in three positions for foreigners went unfilled between 2008 and 2017 (Figure 3.10).

Figure 3.10. Part of the demand for foreign workers goes unfilled

Bi-annual demand for foreign workers, positions filled and unfilled and share of total vacancies 2008-14.

Note: Establishments with five or more employees.

Source: Occupational Survey of Establishments.

The dual labour market in Korea appears dependent to a certain degree on foreign workers. As was noted in the previous section, about 10% of firms respond to labour shortage by calling on foreign workers. These firms are offering low-quality employment, yet due to the restrictions on importing foreign workers, are unable to fill all the positions they would otherwise wish to fill.

Employers claim that the reason they hire foreign workers is that they are unable to recruit Korean workers (Figure 3.11). This is cited as a much more important reason than the long working hours. Low wages are more of an obstacle to hiring Korean workers in greater Seoul than in the rest of the country. When it comes to reasons why firms have difficulty replacing foreign workers with Korean workers, wages are again cited as a problem, especially in greater Seoul, but other factors - long working hours, a harsh working environment - are also cited.

Figure 3.11. Employers of foreign workers say that Korean workers are hard to find

Panel A. Reasons for hiring foreign workers, by region. Panel B. Reasons why it is difficult to replace foreign workers with Korean workers. 2015

Note: Multiple responses possible.

Source: KOSBI survey cited in (Noh, 2015[16]).

In the manufacturing industry, the increase in the foreign share of employment has been noteworthy across the OECD in recent years (Figure 3.12). The share of employment in Korea, close to 10%, is among the higher levels in the OECD, but almost all OECD countries have seen a sharp increase in the foreign worker share of manufacturing employment. The example of root industries in Korea (Box 3.7) provides an illustration of the drivers of foreign employment in manufacturing.

Figure 3.12. The increase in foreign employment in the manufacturing sector is common

Share of foreign in total employment in manufacturing, 2005 and 2015 or latest year

Note: .Fforeign employment in Korea in 2005 is from the 2005 KIS Statistical yearbook, based on the Industrial Training and the Employment Permit visa.

Source: Europe: LFS or GSOEP (Germany); United States: CPS. For Japan, MHLW survey of employers, October 2016, and 2016 LFS. Korea, FLFS and EAPS, May 2016. Israel, PIBA figures for foreigners and LFS for nationals, 2016.

Box 3.7. “Root Industries” and reliance on foreign workers

Non-professional foreign workers in Korea are concentrated in SMEs in manufacturing. One example is that of “root industries”, which conduct basic manufacturing processes as part of the supply chain to larger firms (Lee et al., 2016[18]). These comprise about 450 000 employees, or 14% of the manufacturing workforce. Larger firms rely on subcontractors for important parts of the production process. Competition among SMEs for contracts is intense and margins are low; the industrial processes in root industries – casting, heating, etc. – make working conditions difficult, and, as with SMEs in manufacturing in general, low wages also contribute to high turnover. Vacancy rates are similar to those in manufacturing in general, but few young people are in the workforce in root industries. Foreign workers comprise about 9% of the root industry workforce; since most are young, they account for a disproportionate share of the root industry workforce (Figure 3.13, Panel B).

Figure 3.13. Root industries have an aging workforce and rely on foreign workers

Panel A. Root industry employment, 2013-16, by nationality Panel B. Root industry employment, 2016, by nationality and age

Source: Survey on the situation of Root Industry 2015-16 (Lee et al., 2016[18]).

Root industries supply a number of key Korean manufacturing sectors; the clients of these SMEs are primarily in the automotive and machine-tooling sectors, which require proximity of suppliers. The root industry benefits from favourable provisions in its access to workers under EPS.

In agriculture, the reliance on foreign workers in OECD countries varies, although it has been increasing (Figure 3.14). In Korea the share of foreign workers in agriculture is about 3.5%, while the United States and Spain have much higher shares. Further, these figures are based on labour force surveys, which largely exclude the seasonal workers who play an important part in agricultural employment in many OECD countries; they number as many as half a million in Poland, for example, and several hundred thousand in Germany. The structural reliance on temporary foreign workers in agriculture is a common feature of the sector across OECD countries.

Figure 3.14. A few OECD countries rely heavily on foreign workers in agriculture

Share of foreign workers in total employment in agriculture, 2005 and 2015 or latest year.

Note: 1) Due to LFS design, seasonal workers may not be well represented. 2) Foreign employment in Korea in 2005 is from the 2005 KIS Statistical yearbook, based on the Industrial Training and the Employment Permit visa.

Source: Europe: LFS or GSOEP (Germany); United States: CPS. For Japan, MHLW survey of employers, October 2016, and 2016 LFS. Korea, FLFS and EAPS, May 2016. Israel, PIBA figures for foreigners and LFS for nationals, 2016.

The construction sector is a different situation (Figure 3.15). While in Korea the share of employment, 4.6%, is higher than foreigners’ share in overall employment, it is still less than the role of foreigners in most other OECD countries, where large changes have been seen in the past decade. However, the share of foreign workers in construction declined sharply in the European countries hardest hit by the crisis of the late 2000s and the end of the construction boom: Portugal, Spain and Greece. In most other countries it increased.

Figure 3.15. Foreign workers in construction in Korea are a low share in international comparison

Share of foreign in total employment in construction, 2005 and 2015 or latest year.

Note: Due to LFS design, posted and temporary workers may not be well represented. 2) Foreign employment in Korea in 2005 is from the 2005 KIS Statistical yearbook, based on the Industrial Training and the Employment Permit visa.

Source: Europe: LFS or GSOEP (Germany); United States: CPS. For Japan, MHLW survey of employers, October 2016, and 2016 LFS. Korea, FLFS and EAPS, May 2016. Israel, PIBA figures for foreigners and LFS for nationals, 2016.

Binding workers to employers, sectors and regions

Korea has, as noted, a mix of different labour migration channels. The extent to which foreign workers are bound to their employers or sectors varies, with the E-9 workers facing the most strict conditions, bound to employment in a specific sector and with their job changes conditional on employer approval, illegal employment practices by their employer, layoffs or firm closure. Most other work permits require an employer but allow changes to any other eligible employer as long as the conditions of the visa are respected. A number of permits, such as the F-2 or the F-5 and F-6 permits, do not impose any restrictions on the type of employment.

The E-9 programme, when first introduced, allowed four grounds for job change:

• The employment contract is annulled (e.g., the worker arrives but the firm no longer requires the worker) or ends (e.g., the contract was for one year)

• The business closes or shuts down temporarily

• The business loses its right to employ the foreign worker

• Workplace injury or disability

Workers were allowed three changes of employer over the course of their employment period, not counting those changes cited above where they were not at fault. Unemployed workers had two months to find a new employer, or their permit was withdrawn. During the economic downturn in 2008, the number of E-9 workers who were laid off and seeking employment reached 14 700 from 8 500 in 2007.

The constitutional court considered the question of job-change restrictions in 2010 and left the restrictions standing; if it had abolished them, the sector restrictions would also have been abolished, allowing full labour market access to E-9 workers and throwing into question the Employment Permit-based scheme. The court justified the restrictions by linking admission to the labour market test and the need to protect resident workers. This justification explains why foreign workers are only allowed to occupy jobs for which vacancies are demonstrated, but does not address the question of job mobility among firms which have demonstrated labour shortages which cannot be filled by locally available labour.

The system for matching dismissed E-9 workers to new employers was changed in 2012. Until then, workers could be sent to new employers, or given a list of ten potential employers, which workers could contact directly. If no match was found, a second list of ten could be requested, and so on. Since many workers did not have language skills or capacity to contact employers, unlicensed brokers stepped in and often mediated, taking rents and leading some workers to lose legal status. From 2012, the employment centre has taken on the role of placing unemployed E-9 workers, offering three months job-search support. Based on worker preference for the region, conditions and occupation, text messages with contact of employers are sent; the employment centre also hosts interviews and provides translation if necessary. If the job seeker fails to find a job after two months, the centre proposes at least five employers.

On the employee side, job mobility is of enormous interest; call-centres serving foreign workers in Korea report that job-mobility is the top question they receive from EPS workers. On the employer side, mobility is seen as one of the negative aspects of the programme. Employers are concerned that employers who fail to authorise mobility will see their foreign workers lose motivation and productivity until they are let go.

In practice, job changes are not infrequent. The number of E-9 changes has tripled over time, from 19 000 (12% of E-9 workers) in 2006 to 56 500 in 2015 (about one in five workers). During 2016, 25.4% of E-9 workers applied for workplace change; the MOEL approved 94.3% of them. Most of these are voluntary job changes; involuntary job changes represented just 16% (MOEL, 2017[32]). The rate of change reflects survey data on the intention of workers. According to the survey results of the 2017 Survey on Immigrant’s Living Conditions and Labour Force, 24.4% of E-9 workers wanted to change their current job, of which 32.2% cited the low wage as a reason to change the job.

This rate of job change is also reflected in the employer survey. About 40% of employers of E-9 workers had management difficulty due to the job change of their workers. Among those who had difficulty, the main response measure to retain workers was to raise the wage (49%). Improvement of work environment and accommodation followed (Noh, 2015[16]). About one in four employers facing retention difficulty was unable to take any step to retain workers.

It is surprising that employers would raise wage and improve conditions for retention, since low wages and poor conditions were among the main reasons for which, in the same survey, it was difficult to recruit local manpower (Noh, 2015[16]). The voluntary turnover rate is surprising given the high value assigned to diligent worker status by E-9 workers. In the 2017 FLFS, 77% of E-9 workers intend to stay in Korea after visa expiration, of which 87% cited visa extension (i.e., the returning migrant status) as a way to stay in Korea. To be eligible to be a returning diligent migrant, there should be no voluntary job change during the entire four years and 10 months of stay, and this policy plays a considerable role to prevent E-9 workers from voluntary job change of the employer to which they are originally assigned.

The Employment Permit System makes efforts to find the equilibrium point between employers and foreign worker’s sides by rewarding workers when they do not change job, while creating and improving the arbitration system in case where the job change is deemed to be necessary. The fact that neither worker nor employer are fully satisfied with current provisions suggests that the system is a successful compromise.

Temporary work programmes in OECD countries are always conditional on an initial job offer with a specific employer, but job mobility is generally granted. Few European OECD countries restrict workers to a sector or employer. In European countries, workers have labour market mobility among employers, as long as the new job offered meets the requirements of the work permit. In Spain, foreign workers must remain in the region and sector for which they were recruited for the first year, although they may change employers; after one year, they have full labour market access. In Italy, foreign workers have full access to the labour market immediately, and are not required to start employment with the employer who sponsored them. However, outside Europe a number of temporary work programmes do bind workers to sectors and employers. This is true in the H-2A and the H-2B programmes in the United States, and the temporary foreign worker programme for lower-skilled workers in Canada, where workers are bound to the employers who admitted them as long as their job continues and the employer respects the terms of the contract. Australia’s temporary 457 programme bound workers to employers but allowed some occupational change within the workplace; its 2018 revision (into the 482 programme) further specifies that workers may only work in the nominated position. As neither Canada nor Australia impose numerical limits, job change is subject to the same requirements as initial admission. In Israel, workers must remain in the sector for which they were recruited, but may change among authorised employers or employment agencies. In numerically limited sectors – agriculture and construction – there are more authorised employers than workers, so there is some competition among employers. Ireland included numerical limits in a pilot for lower-wage employment introduced in 2018, targeted at horticulture, meat-packing and dairy. Workers are required to remain within the sector, but may change among employers and positions meeting the programme requirements.

The challenge in these programmes is to find a balance between the acute labour needs of the employer, which justify recruitment from abroad, and the ability of the worker to maintain bargaining power to reduce the chance for exploitation. Binding can be more attractive for employers: employers are less likely to participate in a labour migration scheme if they suspect they will lose their workers to competitors offering more favourable working conditions or higher salary. Further, when admission is meant to provide labour to a specific sector or region, allowing workers to leave for other sectors undermines the labour market test or shortage which justified their admission.

The awarding of employment permits to firms in Korea under the EPS is an example where the logic of the shortage decrees that workers only be able to change among employers holding employment permits. Indeed, authorisation is not for employment in a specific sector but for employment in specific authorised positions. Issuing a higher number of employment permits to firms than workers admitted would however lead to a degree of competition. Restrictions could be placed on sectors and regions of employment, as in other countries, without binding workers to a single firm. The “diligent worker” provisions are an alternative incentive for workers to stay with their employer, so as to return for a second five year spell of employment.

Strengthening the ability of workers to improve compliance

Under EPS, there are no requirements for employers or workers to report effective payment of salaries.

Korea has a high use of internet and high penetration and use of smartphones. The foreign worker programme is no exception and Korea is using new technology to allow foreign workers to monitor their employers’ compliance with labour law and to track their own salary and contributions. Participants in EPS can use an app developed by HRD Korea to monitor their rights, including to calculate the accumulation of severance pay (Departure Guarantee Insurance). However, the weakness of this application is that it relies on the self-reported pay.

In the case of dispute between employers and workers on the amount of severance pay and DGI, the burden is on the employer to prove the actual amount paid.

The use of apps to increase compliance and oversight can be expanded. One example is the “Record my Hours” application developed by the Australian Fair Work Ombudsman, which records arrival and departure time from the workplace using geofencing technology. Manual recording is also possible when there is no connectivity. The multilingual app also assists recording shifts, photographing and saving pay slips, and cloud backup of work diaries. “Record My Hours” is not meant to substitute employer record-keeping, but to allow workers to track their hours and address discrepancies between employee claims and employer records.10 However, geolocation is not as reliable a means for recording working hours when workers live on site, as is often the case with E-9 workers whose housing is provided by the employer.

Within the agricultural sector, compliance issues are more of a concern, due to relative isolation of workplaces, the on-site lodging in often low-quality barracks, and lack of coverage of the Labour Act’s provisions on working hours, rest times and vacations11. In order to address this, a proposal is to grant agricultural workers the right to change employer if housing is considered substandard, or if room and board deductions are excessive or occur without a signed agreement. This provision, if adopted, would create competition among employers to respect minimum standards and improve housing quality, as well as lower housing deductions, as long as sufficient alternatives exist for E-9 workers in agriculture.

A further means for improving the position of workers is to offer training. HRD Korea has offered training to EPS workers during their stay in Korea. From 2010 to 2017, it offered 25 600 places to workers, for 48 hours training, held on Saturdays through job training centres across the country. Training comprises basic and advanced vocational programs, based on the sector of employment. Advanced courses, for the manufacturing sector, focused on technical skills such as automotive repair and welding. The objective of the courses was to improve productivity; additional skills also allow workers a chance at higher-wage jobs within their firms and the transition to E-7 visas. Since 2014, the number of courses offered by HRD Korea and the number of participants fell. However, employers organise training through direct contracting with training institutes. Relative to the total number of EPS workers, take up of training opportunities is fairly limited (about 3% of EPS workers participate).

Reducing overstay

One of the main concerns in the programme is workers overstaying the end of their permit and becoming irregular. This is a frequent problem in temporary labour migration programmes for less-skilled workers in OECD countries. In 2002, the foreign workers were able to complete one year as a trainee and then remain two years of employment. That year, the government increased the number of industrial trainees by 20 000 to 145 000 (Park, 2004). Although this scheme guaranteed their labour rights for a longer period, it could not entirely overcome the limited scope of the original trainee programme. As the programme kept generating problems, it became a prominent social issue. It escalated the debates as the number of undocumented foreigners who were assumed to be working illegally continued to rise to 290 000 in 2002 (Park, 2013). At the end of 2008, foreigners living in Korea without authorisation amounted to 200 000, a 10% decrease from the previous year. In 2016, overstayers amounted to about 10% of the total foreign population, but most were overstaying short-term visiting and tourist visas, rather than work visas. The only longer-term visas with a large number of overstayers, and a high overstay rate relative to the number of visa-holders, were the E-9 visa and, to some extent, sailors (E-10 visa holders), and students who came to Korea to study in Korean language institutions and not in tertiary educational institutions (D-4).

Overstay within the EPS programme was initially very high, as the first group of regularised interns reached the end of their work extension, but fell until 2009 (Figure 3.17). When the first cohorts of EPS workers reached the end of their five-year work term in 2009, the overstay rate began to tick upwards. Recruitment halts and greater co-operation with countries of origin from 2012 led to a decline in the share of overstayers. Overstay – which includes workers abandoning their authorised employers – is higher in sectors where working conditions are relatively poor, such as fisheries (38%) and waste treatment services, but also construction. Overstay of workers admitted into the manufacturing sector was below 12% in 2017, substantially lower than in other sectors. The manufacturing sector also has far more employers than other sectors, giving workers who are unhappy with employment more opportunity to change jobs.12

Figure 3.17. The EPS programme has grown, while overstay rates have declined

Panel A. Stock and flow of E-9 workers, 2004-16, and overstay rate.

Panel B. Stock of E-9 workers and overstay rate by nationality, October 2017.

Source: Panel A: Korea Immigration Statistics. Panel B: HRD Korea (Woo, 2018[33]).

There is a strong desire among E-9 workers to extend their stay in Korea (Figure 3.18). In 2017, only 23.3% said they would prefer to return to their home countries after the end of their stay in Korea, while more than 67% said they would like to extend their stay under the same status. These shares have been constant since the question was first asked in 2012. For other categories of workers and residents, the intention to remain was high. The intention to extend stay or acquire nationality was high among ethnic Koreans (H-2 and F-4 permits). Intentions have been constant for most other groups in the past six years, although the share of working visit (H-2) permit holders hoping to naturalise or acquire permanent residence has declined, in part due to the fact that many of those eligible have changed status to F-4.

Figure 3.18. Most foreign workers would like to extend their stay

Desired outcome when permit expires, by permit type, 2017

Source: Survey on Immigrant’s Living Conditions and Labour Force, 2017.

The high level of intention to remain among E-9 workers (at least, those covered under the survey) suggests that they are not only satisfied with the programme and their job opportunities in Korea but that they are willing to remain under the same programme conditions during an extension.

Overstay is also an issue because of the large pool of employers willing to hire foreign workers without legal status. Many of the former EPS workers have acquired experience and language skills sought by employers; in addition, as overstayers, they do not require dormitories. Some firms have been excluded from EPS due to the PBS distribution, and can only hire foreign workers illegally. If a clear path back to access to EPS is provided, some of these employers may return to legal hiring.

The overstay rate in EPS has been declining, and represents a substantial improvement over the overstay rates of previous labour migration channels. The rate was 16.9% in 2014, 15% in 2015, and 14.1% in 2016, although it increased slightly in 2017 (14.5% in October 2017).

This can be compared with overstay rates in some other temporary labour migration programmes (Box 3.11).

HRD offers training in the home country after return. In 2014, about 8.5% of all EPS workers who went home participated in training following their return to the home country. HRD also puts ex-EPS workers in contact with Korean companies in the origin country seeking foremen and local staff managers for their operations in the country. These opportunities are a powerful incentive to return, since a quality job where their new skills can be used is valuable for workers. The opportunities are primarily available where Korean companies have a strong presence, such as Viet Nam, Indonesia, Cambodia and Mongolia.

To ensure the quality of home-country post-migration training, providers are paid in full only if at least 45% of participants find employment; this encourages good co-operation between training institutes and Korean companies.

HRD also supports successful ex-EPS workers to serve as representatives in their home countries to speak with the local community, to encourage quality candidates and to provide evidence that return can be positive. For this purpose, HRD Korea maintains a database on returned workers. It also issues work experience certificates to departing workers.

How long is too long?

Two considerations underlie the restriction on stay in EPS. First, the indefinite need for the worker is not demonstrated in a context where the long-term need for non-professional labour is not known with certainty. The second is the restriction on family reunification, which makes an indefinite stay difficult to reconcile with family life. The restriction on family reunification is in turn justified by the low wages paid for the jobs filled by EPS workers, which are not enough to support a family without assistance from benefit programmes. Further, the gruelling working hours of E-9 workers – consistently averaging 20 hours weekly overtime (as seen in Table 3.6) – are incompatible with a sustained rhythm of employment.

The maximum stay under the EPS is 10 years (more precisely, nine years and eight months), a limit which was reached by the first cohort of workers in 2017, covering those who returned after five years. There are two separate grounds for returning workers after their first five year period: the diligent worker option and the language exam. Diligent workers are those who stay with their employer for the entire period in which they are in Korea; SMEs with fewer than 100 employees (50 employees prior to 2019) may request their return. The advanced language exam is administered in the country of origin and successful applicants may return to Korea for a second period of employment, with a new employer or with their old employer. It was decided in 2017 that these cannot be cumulative, capping stay at 10 years.

The number of workers allowed to return is set annually as part of the quota-setting exercise (Figure 3.2), and has been around 10 000 since 2011. Most go back into manufacturing sector jobs. About 6.2% of returning EPS workers are women.

This is the longest stay allowed in any temporary labour programme for low-skilled in OECD countries. In the United States, the maximum stay is three years, for example. Canada eliminated its four-year limit for temporary workers in 2016. In Israel, the maximum stay is five years (although care workers may extend their stay for the lifetime of their patient).

In practice, there is some evidence that E-9 workers form families in Korea (although if they have children with other E-9 workers, the children do not have a right to a residence status), or bring their spouse from their home country through other means.

Options for permanent migration

The temporary labour migration programmes for non-professional workers introduced in the 2000s were meant to be temporary, with no explicit pathway to permanent residence. Employers, however, expressed interest in retaining the most talented and reliable foreign workers. Further, a solution had to be found for the ethnic Koreans who were nearing the expiration of their stay and were well settled, especially those who were working in regions or occupations in demand.

For the first group, a provision was put in place offering a small window for status change from E-9 to E-7. The increase in E-7 visas, however, cannot be attributed to this, since few E-9 holders met these strict conditions. The requirements were eased in 2015. There were 249 status changes from E-9 to E-7 in 2015, a small number compared with the number of expiring E-9 visas. The vast majority of E-9 visa holders do not qualify for the bridge to E-7. They are more likely to qualify for an F visa due to marriage with a Korean national; indeed, in 2015, 428 E-9 workers acquired permanent residence through this channel.

In mid-2017, a second provision for bridging from E-9, E-10 and H-2 visas to the E-7 visa was created, using a points-based system. This visa, the E-7-4, allows candidates to qualify by scoring points on different criteria (work experience, income, age, Korean language proficiency and level of education, as well as considerations such as employment in “root” industries). The E-7-4 was introduced as a pilot scheme and capped at 300 visas, which were immediately taken up; a further 300 were made available for 2017. Only SMEs with fewer than 150 employees may sponsor a change, unless they are in root industries. A firm-level limit on status change is imposed, with firms only allowed one or two changes to E-7-4 per round, depending on the firm size and sector: root industry firms with five employees or more are allowed to sponsor a status change for one employee; other firms must have at least 10 employees. Firms with 50 to 149 employees may sponsor two employees. Root industry firms may sponsor additional E-7-4 applications, up to five according to firm size.

In light of the complexity of the PBS used for E-7-4 (Annex Table 3.A.4), and the requirement to remain in the same employment, careful monitoring of beneficiaries will be necessary in the first years of the pilot to ensure that income levels remain at the level initially considered in the PBS. Evaluation of the outcomes of these visa-holders, in terms of their later status change behaviour, their family reunification patterns and the outcomes of their family members, will be important to adjust the PBS and decide whether to lift caps. This is particularly relevant if the E-7-4 PBS replaces the previous E-7-1 bridge.

A further provision is available for E-9 workers, the F-2-6 visa. This visa, also open to E-10 and H-2 visa holders, is available for workers who have worked for at least three years in the manufacturing, construction, agriculture and fishery sector. It requires a salary above the national average for the previous two years; about USD 18 000 in liquid assets, and a medium level of Korean language ability (TOPIK 3). A language exemption is available for those who have a skill certificate.

Working Holiday Makers

Korea has signed Working Holiday Agreements with 20 countries, although outflows from Korea are much higher than inflows. Korea had about 4 500 WHMs incoming in 2015, a decline from the peak year of 2014, when inflows stood at 6 400 (Kang, 2016[41]). Most are Japanese, followed by Chinese Taipei and Hong Kong. Most came to learn Korean, rather than to earn money. Due to their generally low level of Korean language skills, the job opportunities of WHMs in Korea are more constrained than in the English-language destination countries of WHMs. While WHMs might be able to play a minor role in certain jobs – and changes of status towards for example language teaching or students should be examined more closely – this channel is not intended to - and not likely to - address labour shortages.