Korea’s demand for foreign labor weakens due to wage hikes, sluggish economy

2019.05.08 11:46:26 | 2019.05.08 14:25:34

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South Korea’s sluggish economic activity, coupled with steep minimum wage hikes, has hurt not just local hires but recruitment of migrant workers.

According to the Ministry of Employment and Labor and the Korea Federation of Small and Medium Businesses (Kbiz) Tuesday, applications for migrant workers in the April-June period fell below the quarterly quota of around 10,000 for the second straight quarter. This is the first time in five years for applications in the first half to come up short.

Under Korean labor laws, the government allocates about 10,000 foreign laborers every quarter upon request from local businesses that face a shortage of low-skilled workers at home. About 40,000 to 50,000 migrant workers come to Korea every year under this program, with visas that allow them to work in the country for up to four years and 10 months.

Applications for overseas workers had well exceeded quota levels over the past several years as Koreans increasingly shunned low-paid, dangerous and physically demanding jobs. In 2017, the number of applications submitted was more than double the quota, reaching 229.3 percent.

But this dropped to 140 percent in 2018 following the 16.9 percent increase in the minimum wage, and slipped further this year when wages were raised by another 10.9 percent. Applications for the first quarter reached just 98.5 percent of the quota, with second-quarter filings expected to sink further to 98 percent.

According to Kbiz, many small enterprise owners can no longer afford to employ more foreign workers because of the higher wages and pressures to cut costs amid faltering manufacturing activity at home. They are also calling out for moderation in wage hikes for struggling businesses.

Foreign workers that came to Korea under the Employment Permit System reached 278,000 last year. Most of them are employed in small and midsized companies, with 18 percent working in the metal manufacturing sector, 15 percent in plastic and rubber product manufacturing and 11 percent in equipment and machinery. They receive nearly the same amount of pay as domestic workers, with an average monthly income of 2.55 million won ($2,177). Labor costs of foreign workers in the country are expected to reach an estimated 9.34 trillion won this year, up 600 billion won from the previous year due to the wage hike.

By Seo Chan-dong and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]