Low-skilled labor migration: Korea’s Employment Permit System

(In observance of the International Migrants Day on December 18)

In response to looming labor shortages in the so-called “3-D” industries (difficult, dangerous, dirty), Korea has allowed the entry of low-skilled foreign workers since 1990’s. Its Industrial Trainee Scheme introduced in 1993 was inadequate to address labor demand (an increasing employment of irregular foreign workers), unequipped to warrant trainees’ labor rights and social protection, and associated with high recruitment cost borne by trainees. The latter appears to be liked with trainees’ overstay - to recoup their initial sunk cost. 

The Employment Permit System (EPS) in 2004 aims to address these shortcomings and serves as a key instrument to manage the inflow of low-skilled foreigners. The core EPS principles are:

• Complementarity: it resolves low-skilled labor shortages in small- and medium-sized firms.
• Transparency: to curb corruption and rent-seeking behaviors of recruitment firms, government agencies manage the entire recruitment process.
• Alignment with firms’ needs: it sets out clear basic skill qualifications for jobs, including Korean competency.
• Temporary migration: it strongly encourages foreign workers to return home.
• No discrimination: it ensures that foreign workers receive four social/labor-protection-related insurances during their employment and a lump-sum pension payout at the termination of their employment.

The EPS encompasses two types of employment: E-9 and H-2 visas.¹  E-9 visa is for low-skilled foreigners and restricted to an annual quota set by sending country which reflects labor demand from SMEs. The visa allows eligible foreigners to work up to 4 years and 10 months in the manufacturing, agriculture, fishery, construction, and few services industries. Permits are firm-specific and can be transferable up to three times. As in many other countries, to ensure the temporary nature of this immigration, the resettlement of dependents in Korea is not permitted.

H-2 visa is a preferential employment visa for ethnic Koreans from 11 countries - China and the Commonwealth of Independent States. Eligible ethnic Koreans must pass a language test, obtain a visa through a lottery system, and return to their country after working for a maximum of five years.²  Unlike E-9 visa, H-2 visa holders can enter Korea without a prior-employment arrangement and are allowed to work in the service industry.

The EPS seems to achieve its objectives to some extent. In 2011, the EPS was bestowed the first place prize of UN Public Service Awards in the category of ‘Preventing and Combating Corruption in the Public Service’. Inflows of low-skilled workers reached the quota of 72000 in 2008, owing to renewals of existing migrant workers, supplying labor to 77000 SMEs. According to the MOEL, the recruitment cost declined from $3,509/worker in 2001 to $950/worker in 2012.

In an effort to curb overstay, the government provides free training and reintegration services, but the issue of overstay is present, albeit on a smaller scale than under the Industrial Trainee Scheme. The government’s assistance includes (i) during employment, vocational training unrelated to their current work, (ii) after their return, training tailored for employment in Korean firms established in their home countries and employment services (e.g., Happy Return Program in the Philippines). Results are mixed: in 2012, 286 out of 823 returnees with tailored vocational training were employed in local Korean firms; and 377 out of 2087 returnees who received employment services found jobs in their home countries, according to the Ministry of Employment and Labor.

Under its Second Basic Plan for Immigration Policy (2013-17), the government aims to adopt a two-pronged approach to address the irregular worker issue: to strengthen border security and information systems on foreign residents, and to enhance its capacity to crackdown on irregular workers and their employers. Another drawback is that the system is insufficient to gauge skill levels of prospective workers, and the government explores a system that promotes skill development in sending countries.
 

[1] The government plans to consolidate the two visas into E-9 visa.
[2] They can stay longer once obtaining F-4 visa.