South Korea’s rapidly aging population has created a pressing demand for elderly care services, but the country faces a critical shortage of care workers. This imbalance has led to a sharp increase in care costs, placing a heavy financial burden on average households.

In response, the Bank of Korea (BOK) has proposed a contentious solution: recruiting foreign workers and offering them wages below the national minimum wage.

The proposal to introduce foreign labor at sub-minimum wages has sparked intense debate, with critics arguing that it undermines labor rights and perpetuates discrimination. Advocates, however, see it as a necessary measure to alleviate the mounting pressure on South Korean families and ensure the availability of affordable care services.

CARE COST AND HOUSEHOLD INCOMES

The BOK reports that the monthly average cost of caregiving in South Korea is 1.7 times the median income of elderly households (aged 65 and over). In contrast, child care assistance costs exceed 50% of the median income of households in their 30s. This disparity makes it difficult for regular families to afford caretakers.

Kang Cheol-hee, a professor of social welfare at Yonsei University, told Korea Pro that many South Korean households would not be able to hire foreign caregivers if the government mandates that workers qualify for the national minimum wage.

The average monthly salary of Koreans is about $2,200 (3 million won) and the minimum wage is currently $1,490 (2 million won) per month.

In light of this, the BOK has proposed employing foreign workers in caregiving services at wages lower than the national minimum wage. However, migrant organizations have sharply criticized this proposal, arguing that it disregards labor rights and perpetuates discrimination against immigrants and women.

The Korean Confederation of Trade Unions (KCTU) — an umbrella labor organization — highlighted the already low wages of home care workers.

“Home care workers’ wages are so low that they threaten the right to live. And all these jobs are on irregular contract terms. Who would endure such conditions?” Jeon Ho-il, the vice chairman of the KCTU, stated during a press conference last weekend.

The Migrant Workers’ Union argued that the proposal violates the International Labour Organization’s Discrimination (Employment and Occupation) Convention, which prohibits discrimination based on nationality or social status, and the ROK Constitution, which guarantees the right to equality.

Foreign caregivers’ low wages are further exacerbated by the abuse that many of them face at the hands of their employers. A 2022 survey by the KCTU’s social welfare branch revealed that 43% of foreign respondents working in family centers have experienced discrimination and bullying.

Members of the Korean Confederation of Trade Unions and the Migrant Rights Alliance attend a rally at Seoul Station Plaza commemorating the 2024 International Day for the Elimination of Racial Discrimination, March 17, 2024 | Image: Migrant Workers Movement Supporters Group

COMPARATIVE WAGES

While critics argue that the BOK’s proposal is unjust, experts say that policymakers must take comparative wages into consideration.

As a parent who relied on foreign caregivers in Singapore and South Korea, Kang from Yonsei University told Korea Pro that he paid $600 per month in Singapore compared to $1,860 (2.5 million won) in Korea for the same service. He questions how many people, especially newly married couples, can afford this expense.

“It might seem unfair to pay foreign domestic helpers so little compared to the national average, but that is still up to five times their potential earnings in their home countries, especially if they are from poorer nations,” Kang told Korea Pro, emphasizing the need for state intervention.

Kwon Jung-hyun, a senior researcher at the Korea Development Institute (KDI), stated during a BOK seminar on May 5 that foreign caregivers are not eligible for the national minimum wage in countries such as Singapore, Taiwan, Japan and Germany and that these countries apply differential minimum wages through employment permit systems.

With South Korea expected to become a super-aged society by 2025, with over 10 million senior citizens aged 65 and above, the debate over the proposed policy will likely intensify amid concerns about its implications for labor rights and societal equality.

The Bank of Korea and the Korea Development Institute jointly host a seminar, March 5, 2024 | Image: Korea Development Institute

LEGAL LOOPHOLES

As a signatory of the International Labour Organization, South Korea cannot directly apply different minimum wages based on nationality. However, the BOK has proposed two methods that circumvent this legal constraint.

The first involves individual households directly employing foreigners through private contracts. Under South Korea’s “Act on the Employment Improvement of Domestic Workers,” domestic helpers employed directly by general households are not subject to the minimum wage. This is the approach that Hong Kong, Singapore and Taiwan have adopted.

The second method includes categorizing caregiving services as industries subject to the foreign employment permit system, which allows for the application of differential minimum wages. Japan, Germany and the U.K. have implemented this method.

Kim Hyun-chul, an associate professor of economics from the Hong Kong University of Science and Technology, highlighted the success of Hong Kong’s model, where a significant reduction in wages for foreign domestic helpers led to an increase in their employment and greatly enhanced the labor market participation rate of local women with young children.

However, Kwon of KDI cautioned that it would be difficult to ensure that foreign care workers would continue to work for sub-minimum wages considering the physically demanding nature of their occupation. She stressed the need for measures to prevent workers from leaving permitted employment sectors and becoming undocumented migrants.

Choi Young, a sociology professor at Chung-Ang University, concurred with the need for government intervention.

“It is unreasonable for consumers to demand high-quality services when they expect to pay below market prices. The state must play a role,” Choi told Korea Pro.

Members of the Korean Public Service and Transport Workers’ Union (KPTU) held a press conference for care and migrant workers in front of the Bank of Korea in Seoul, March 13, 2024 | Image: Migrant Workers Movement Supporters Group

UNION OPPOSITION

South Korean trade unions have condemned the BOK’s proposal, labeling it a blatant act of discrimination and a regressive step for labor rights in the country.

During a press conference in March, Choi Hee-yeon, a co-representative of the Korean Women’s Association United, expressed her outrage at the BOK, stating that the approach perpetuates discrimination, devalues caregiving and prioritizes profits over people.

Migrant Trade Union chairman Udaya Rai condemned the proposal’s inherent discrimination.

“Paying migrant workers less simply because of their nationality is unethical. The BOK’s willingness to sacrifice migrant care workers for supposed national interest is nothing short of advocating for discrimination,” Rai said.

Jeon of the KCTU warned that the proposed changes would worsen the already poor working conditions and pay in the care sector.

“The government’s neglect has allowed the quality of care jobs to deteriorate. Now, the BOK wants to reduce wages further and privatize care services, potentially leading to the collapse of societal care as we know it,” he stated.

Kang Suk-yoon, the vice chair of the Federation of Korean Trade Unions — another umbrella labor organization — accused the BOK of attempting to bypass international labor agreements and domestic laws to cut costs. 

“This proposal is not a genuine research outcome but a disgraceful tactic to reduce expenses at the cost of workers’ rights,” Kang said.

The debate over paying sub-minimum wages to foreign care workers will likely continue for the foreseeable future.

Even if the workers can earn up to five times their potential earnings in their home countries under the differential minimum wage system, they would still be subjected to South Korean living standards.

However, the number of South Koreans, particularly senior citizens, who need foreign care workers’ services but cannot afford to pay market wages, will likely continue to demand government intervention. However, whether the government will be able to provide feasible assistance, given its austere fiscal policies, remains to be seen.

Edited by John Lee