Policies on the Employment of Foreign Workers: Issues and Challenges

KDI-OECD Conference on Korea’s Social Policy Challenges

Policies on the Employment of Foreign Workers: Issues and Challenges Presentation to the KDI-OECD Joint Conference on Korea’s Social Policy Challenges February 5, 2013 Yeon Soo Kim Korea Development Institute Kyu-Yong Lee Korea Labor Institute

Policies on the Employment of Foreign Workers: Issues and Challenges

Trends in migration flows -

Number of foreign-borns reached 1.46 million in July 2012( 2.9% of the Korean population) Size of foreign population doubled in less than 10 years Absolute number and share still low in OECD comparison, esp. for permanent migrants But increasing at rapid pace: number increased by 133,000 in 2011 alone 1,600

3.0

1,400

2.5

1,200 2.0 1,000 1.5 800 1.0

600

400

0.5 2001

2002

2003

2004

2005

2006

Foreign population (Left, Thousand)

2007

2008

2009

2010

2011

2012.07

Share of total population (Right, %)


Composition of Foreigners - International students (Study Korea Project), marriage migrants, foreign workers(EPS) - By country of origin: 48.6% from China, mostly countries with bilateral labor agreements - Korea increasingly a major destination country in Asia for foreign workers Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Marriage

Students Professional

migrants 24,949 34,710 44,416 57,069 75,011 93,786 110,362 122,552 125,087 141,654 144,681

D2 +D4

E1~E7

E9 + H2

E9

H2

D8

7,998 11,308 13,928 19,966 27,498 42,289 61,836 75,587 82,374 107,409 104,858

20,610 24,155 22,431 21,729 24,785 29,011 33,502 37,304 40,698 43,608 47,095

159,755 165,198 113,000 161,867 403,687 490,109 494,646 506,905 537,663

159,755 165,198 113,000 161,867 175,001 190,777 188,363 220,319 234,295

0 0 0 228,686 299,332 306,283 286,586 303,368

6,594 7,178 5,902 6,041 7,107 7,300 8,109 8,356 7,907 7,557 7,405

Total 501,958 609,797 656,380 728,339 747,467 910,149 1,066,273 1,158,866 1,168,477 1,261,415 1,395,077

Non-professional

Investors


Composition of Foreigners - International students (Study Korea Project), marriage migrants, foreign workers(EPS) - By country of origin: 48.6% from China, mostly countries with bilateral labor agreements - Korea increasingly a major destination country in Asia for foreign workers Nationality Total Grand-Total 1,395,077 Asia-Total 1,181,435 China 677,954 Korean-Chinese 470,570 Non Korean 207,384 United States 132,133 Vietnam 116,219 Japan 58,169 Philippines 47,542 Thailand 45,634 Indonesia 36,971 Uzbekistan 29,742 Mongolia 28,634 Taiwan 26,316 Canada 21,812 Srilanka 21,554

% of total 100% 84.7% 48.6% 33.7% 14.9% 9.5% 8.3% 4.2% 3.4% 3.3% 2.7% 2.1% 2.1% 1.9% 1.6% 1.5%

Legal 1,227,297 1,027,529 610,920 453,286 157,634 124,657 97,343 56,933 35,679 31,539 31,253 24,714 18,966 25,366 21,098 18,939

Illegal 167,780 153,906 67,034 17,284 49,750 7,476 18,876 1,236 11,863 14,095 5,718 5,028 9,668 950 714 2615

% illegal 12.0% 13.0% 9.9% 3.7% 24.0% 5.7% 16.2% 2.1% 25.0% 30.9% 15.5% 16.9% 33.8% 3.6% 3.3% 12.1%


Policies for foreign workers: overview - Labor migration system characterized by its duality - Distinctly different paths into either low-skilled or high-skilled employment - Corresponding eligibility requirements and benefits(scope of permitted activities, path to permanent settlement, accompaniment of family, etc.) High-skilled workers - Current definition (as seen from visa types): Professor (E-1), Foreign language instructor (E-2), Research (E-3), Technological transfer (E-4), Professional employment (E-5), Arts and Performances (E-6) and Specially designated activities (E-7) - High share of English language teachers(E-2 visa) - Visas generally issued if eligible and employment contract obtained - Global competition for talent: Science card, Gold card, Point system - But utilization has been very low... Low-skilled workers: Nonprofessional employment (E-9) and Working visit (H-2) - Employment Permit System, since 2004: ‘Act on the Employment etc, of Foreign Workers’ - First official provision for the employment of low-skilled foreign workers - Provision for ethnic Koreans(mostly from China) added into the EPS in 2007: H-2 visa - Public sector in charge of selection and admission process: transparency guaranteed


Employment Permit System(EPS) -

Foreign Workforce Policy Committee decides annual quota Quota allocated by industry and visa type (E-9 and H-2) Employer requests permission to hire foreign worker Labor market test required: job posting with public employment support center (14 days)

Differences between E-9 and H-2 - E-9 visa: Potential employer reviews list of recommended candidates and makes selection (based on basic information, e.g. age, nationality, education). Worker enters country after employment contract signed and visa issued - H-2 visa: Ethnic Koreans are allowed to enter country and conduct free job search on acquisition of Working visit(H-2) visa - H-2 visa holders permitted to work in services and change employers w/o authorization Legal status and rights - Family accompaniment not allowed - Max length of employment: 3 years + 1 year 10 months - Recent amendment in law lets qualifying foreign workers stay for another 5-year term - No path to permanent residency for E-9 visa holders - Covered by departure guarantee insurance, national health insurance, return cost insurance, wage payment guarantee insurance, national pension(reciprocity)


Employment Structure - Distribution of foreign workers by industry and establishment size given below - Concentration of E-9 in manufacturing, H-2 in services and manufacturing - Persistent and rising demand

Industry Manufacturing Construction Agriculture and Livestock Services Fishing Total

2007 119,411 207 154 24,121 5 143,898

2008 147,494 1,825 2,921 23,153 485 175,878

2009 154,335 4,841 5,815 24,108 949 190,048

2010 167,353 12,777 6,545 35,388 1,376 223,439

2011 190,391 9,234 10,153 34,741 2,130 246,649

Establishment Size Total E-9 visa H-2 visa

1~4 40,200 19,236 20,964

5~10 46,619 36,405 10,214

11~30 75,898 59,876 16,022

31~50 33,488 26,042 7,446

51~100 25,176 19,868 5,308

101~200 15,286 12,607 2,679

201~300 301~500 4,164 1,334 3,502 1,094 662 240

501+ 307 229 78

Total 242,472 178,859 63,613


Comparison of wages and working conditions - Foreign workers on average earn 81.4% of that of domestic workers - Foreign male workers earn 78.4% of similar domestic male workers - Foreign female workers earn 89.8% of similar domestic female workers

Domestic vs Foreign Domestic vs Foreign, by sex

By Visa Type

Domestic Worker Foreign Worker Domestic Male Worker Domestic Female Worker Foreign Male Worker Foreign Female Worker Domestic Worker Non-professional Visa (E-9) Working Visit Visa (H-2) Ethnic Koreans (F-4) Others

Monthly Wage 1,983 1,616 2,127 1,589 1,667 1,427 1,983 1,638 1,565 1,655 1,442

Regular Wage 1,648 1,263 1,765 1,328 1,264 1,261 1,648 1,228 1,342 1,372 1,242

Regular Hourly Wage 10.628 7.322 11.58 8.007 7.759 5.708 10.628 7.69 6.527 6.664 6.418 (Unit: 1,000won)


Comparison of wages and working conditions - Monthly wages are highest in manufacturing and construction, and lowest in fishing - Hourly wage is highest in fishing (little overtime)

All industries Agriculture and Livestock Fishing Manufacturing Construction Services Food services Other services Private nursing Employment in Private Households

Monthly Wage 1,616 1,233 1,195 1,679 1,732 1,392 1,381 1,520 1,428 1,352

Regular Wage 1,263 1,168 1,194 1,240 1,470 1,359 1,349 1,409 1,427 1,341

Regular Hourly Wage 7.322 8.139 14.324 7.254 9.192 6.17 7.446 6.935 3.197 3.223


Comparison of wages and working conditions - Foreign workers work considerably longer hours across industry and establishment size - Foreign workers in services industry work the longest hours: workers in private nursing, domestic helpers spend most of their day working… - Labor costs of foreign workers relative to productivity are similar to or higher than domestic workers Domestic vs Foreign, by sex

By Industry

Establishment Size

Total Work Hours 218.8 215.8 238.8 294.4 252.5 186.4 239.9 217.8 328 296.4

Overtime Work Hours 34.2 29.8 46.2 20.4 10.8 0.8 50.1 30.4 5.9 8.6

5∼9 Employees

228.5

24.6

10∼29 Employees

239.5

47.6

30∼99 Employees

242.8

59.7

100∼299 Employees 300 or More Employees

257.2

67.7

249.6

82.3

Domestic Male Worker Domestic Female Worker Foreign Male Worker Foreign Female Worker Agriculture and Livestock Fishing Manufacturing Construction Services 1~4 Employees


Labor market impact - Shortage of studies largely due to lack of data: inconclusive - Recent studies confirmed negative impact on employment - Growing dependency on foreign workers 2005

Industry

Manufacturing Construction Agriculture and Livestock Services Fishing Unknown Establishment size Less than 5 (Number of Between 5-9 Employees) Between 10-29 Between 30-49 Between 50-99 Between 100-299 300 or More Unknown Total

2011

Foreign Worker 34,926 91 380 10,523 6

Domestic Worker 766,097 10,117 3,661 69,406 465

% Foreign Workforce 4.36 0.89 9.4 13.17 1.27

19,163 7,293 11,805 3,415 2,374 1,178 107 591 45,926

90,603 59,087 206,050 121,306 144,738 165,855 49,820 12,287 849,746

17.46 10.99 5.42 2.74 1.61 0.71 0.21 4.59 5.13

Foreign Worker 205,262 14,756 12,561 34,695 3,096 488 90,736 35,926 73,767 26,826 22,618 15,374 1,034 4,577 270,858

Domestic Worker 956,004 11,792 4,717 110,166 620 126,289 93,193 271,610 145,875 171,733 194,020 63,280 17,299 1,083,299

% Foreign Workforce 17.68 55.58 72.7 23.95 83.32 100 41.81 27.82 21.36 15.53 11.64 7.34 1.61 20.92 20


Current Issues - Expansion of quota based on labor shortage • Causes of and solution for labor shortage, preference for and growing dependence on foreign workers amidst persistent labor shortage - Unintended permanent settlement of low-skilled foreign workers • Frequent changes to program regarding maximum length of employment - Failure to align beneficiaries and cost-bearers • Direct administrative costs and job training expenses funded with taxes - Restricting firm’s choice in selecting workers • Firms’ difficulties verifying qualifications of workers - Mixed policy stance on ethnic Koreans • Demand-driven labor market approach vs Provision of economic support - Lack of comprehensive policy management • Employment is either professional or non-professional: dualized system


Challenges moving forward - Define operational principles of foreign workforce system • Complement domestic workforce, prevent settlement of low-skilled workers, noninterference with industrial restructuring - Protect labor market for domestic workers • Improve design and implementation of labor market test - Strengthen competitiveness through productivity enhancement of foreign workers • Provide incentives to participate in training programs - Reduce social costs of foreign workforce employment • Reduce number of illegal workers - Need for better strategies to attract high-skilled workers • Take account of demand for diverse skills • Refine classification of high-skilled workers by skill level • Review strategies to attract and utilize international students

Policies on the Employment of Foreign Workers: Issues and Challenges - Set policy direction for ethnic Koreans - Implementation of foreign workforce policy with medium- to long-term perspective • Consideration of domestic labor market and industrial policies