Labor Market & Employment Policies

※ This is a translated version of the paper published in the Monthly Labor Review (KLI, September 2008).
※ Lee, Kyu-Yong, Research Fellow, Korea Labor Institute (leeky@kli.re.kr)
※ Park, Sung-Jae, Senior Researcher, Korea Labor Institute (parksj@kli.re.kr)

Ⅰ. Introduction

Remaining at roughly 400,000 since 2000, the number of foreign workers in Korea began to increase by more than 100,000 annually starting in 2005 so that it stands at approximately 700,000 as of July 2008. The number of illegal immi-grants is also on a steady rise. Foreign workers account for 3.0% of Koreas total employed population (4.4% of wage workers), and it is estimated that the proportion of non-professional foreign workers will increase to 8.6% of the total Korean workers in production and manual jobs in Korea.

Foreign workers tend to be preferred over Korean workers if their job skills or work capacities are on a similar level, because foreign workers reservation wages are lower. This is why most countries are protecting the labor market for their citizens by emphasizing the role of foreign workforce inflow as a comple-ment to the domestic labor market, with the exception of highly talented foreign workers with professional expertise. In other words, countries attempt to minimize the negative repercussions created by the introduction of foreign workers into their labor markets by supplying the foreign workforce mainly into sectors avoided by their domestic workers. The types of employment that low-skilled foreign workers engage in are considered particularly crucial factors in foreign workforce policies, as they mostly tend to be the kinds of jobs that workers in socially vulnerable classes depend on.

Measures often used to protect the labor market for a countrys citizens include efforts to employ domestic workers (labor market test) as well as controlling the levy or quota of foreign workers supplied. Most countries also limit the industries or types of jobs in which employment of foreigners is permitted, and grant businesses limited eligibility to employ foreign workers.

Gathering information on the foreign workforce labor market is a crucial aspect for successfully operating the above measures and protecting domestic workers. Analyses of factors such as the employment structure or wages of the foreign workforce will help improve the effectiveness of foreign worker policies that are in balance with the labor market for citizens. It is consequently a highly important task to build systematic data on the foreign workers labor market. However, the official data on the labor market of foreigners currently employed in Korea is very limited in scope, as employment statistics are only reported for a part of the overseas Korean workers of foreign nationalities and the workers legally employed under the Employment Permit System .

In view of that limitation, this paper aims to make use of the available data to estimate the industry distribution of non-professional foreign workers employed in Korea. In addition, the paper explores the effects of the employment of foreign workers in related sectors, as compared with the changes in the labor market for domestic workers.