Korea s Temporary Low-skilled Foreign Worker Policy: An Overview _01. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _11

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3 Contents Chapter 1 Korea s Temporary Low-skilled Foreign Worker Policy: An Overview _01 Chapter 2 Changes to Korea s Temporary Low-skilled Foreign Worker Policy _11 Chapter 3 Outline of Employment Permit System _57 Chapter 4 Implementation of General Employment Permit System _71 Chapter 5 Implementation of Special Case Employment Permit System _123 Chapter 6 General Employment Permit System vs. Special Case Employment Permit System _139 Chapter 7 Employment Permit System s Main Achievements _151 Chapter 8 Main Pending Issues _175 Chapter 9 Conclusions _197 Appendix A Act on Foreign Workers Employment, Etc. _212 Appendix B Enforcement Decree of the Act on Foreign Workers Employment, Etc. _238

4 List of Tables <Table II-1> Changes to Korea s Temporary Foreign Worker Policies 13 <Table II-2> Changes to Quotas and Sojourn Periods of Industrial Trainee System 22 <Table II-3> Changes to Quotas and Sojourn Periods of Training Employment System 26 <Table II-4> Annual Foreign Worker Quotas by Sojourn Status 34 <Table II-5> Changes to Employment Period 35 <Table II-6> Changes to Sending Countries 36 <Table II-7> Changes to Sectors Permitted to Hire Foreign Workers 37 <Table II-8> Changes to Required Period for Domestic Worker Recruitment 38 <Table II-9> Proposed Changes to Required Period for Domestic Worker Recruitment 40 <Table II-10> Changes to Workplace Change System 41 <Table II-11> Current Status of Unclaimed Departure Guarantee Insurance Payment 44 <Table II-12> Changes to Departure Guarantee Insurance Payment Methods 46 <Table II-13> Changes to Korean Government Policy on Overseas Korean Immigration Control 48 <TableII-14> Development of Special Case Employment Permit System 55 <TableIII-1> Institutions Involved in the Employment Permit System 65 <TableⅣ-1> 2016 Plans for Foreign Worker Importation 74 <TableⅣ-2> Number of Foreign Workers Permitted in Manufacturing Sector 75 <TableⅣ-3> Number of Foreign Workers Permitted in Construction Sector 76 <TableⅣ-4> Number of Foreign Workers Permitted in Service Sector 77 <TableⅣ-5> Number of Foreign Workers Permitted in Agriculture Livestock Sector 77 <TableⅣ-6> Designation of Countries Selected for Small-scale Industries 80 <TableⅣ-7> Contents of Memorandum of Understanding 81 <TableⅣ-8> Points System Criteria of Year 2015 in Manufacturing Sector 87 <TableⅣ-9> Points System Criteria of Year 2015 in Agriculture, Livestock, Fisheries, Construction and Service Industries 88 <TableⅣ-10> Types of Foreign Worker Insurance 93 <TableⅣ-11> Training Occupations of HRD Korea Foreign Worker Training 101 <TableⅣ-12> Foreign Workers Participating in HRD Korea Training 102 <TableⅣ-13> Subjects and Contents of Employer Education 103 <TableⅣ-14> Capacities of Foreign Workforce Consultation Center 104 <TableⅣ-15> Subjects and Contents of Education to Assist Foreign Workers after Workplace Change 107 <TableⅣ-16> Participants in New Workplace Adaptation Education 108

5 <TableⅣ-17> Support Programs before and after Repatriation 109 <TableⅣ-18> Building of Returned Foreign Workers Manpower Pool 111 <TableⅣ-19> First Customized Training for Work at Overseas Korean Firms 113 <TableⅣ-20> Current State of Customized Training for Work at Overseas Korean Firms 113 <TableⅣ-21> Return Job Program 114 <TableⅣ-22> Operation of Recruitment Fairs 115 <TableⅣ-23> Return Job Program with Recruitment Fairs 115 <TableⅤ-1> Sectors Permitted to Hire Foreign Workers 128 <TableⅥ-1> Main Elements of the General Employment Permit System and the Special Case Employment Permit System 141 <Table Ⅵ-2> Changes in Employment Areas Open to Foreign Workers of the General Employment Permit System and the Special Case Employment Permit System 144 <TableⅦ-1> Current State of Foreign Worker Employment 155 <TableⅦ-2> Current State of Low-skilled Foreign Worker Employment 155 <TableⅦ-3> Current State of Foreign Worker Employment by Industry 156 <TableⅦ-4> Illegal Sojourner Trends 158 <TableⅦ-5> Average Worker Sending Costs 163 <TableⅦ-6> Perceived Fairness of Foreign Worker Selection Process 164 <TableⅦ-7> Comparison of Satisfaction with Industrial Trainee System (ITS) and Employment Permit System (EPS) 165 <TableⅦ-8> Level of Satisfaction with Foreign Workforce Support Centers 165 <TableⅦ-9> Level of Occupational Satisfaction of Foreign Workers 166 <TableⅦ-10> Level of Work Life Satisfaction of Foreign Worker 167 <TableⅦ-11> Workplace Guidance and Inspection 169 <TableⅦ-12> Industrial Accidents Involving Foreign Workers 170 <TableⅧ-1> Number of Workplace Changes 185

6 List of Figures [Figure IV-1] Expansion of Sending Countries (as of 2015) 79 [Figure IV-2] Sending and Importation Process of Foreign Workforce Prior to Entry 95 [Figure IV-3] Monitoring Process during Initial Sojourn Period 98 [Figure IV-4] Flow Chart of HRD Korea Foreign Worker Training 101 [Figure IV-5] Consultation Procedures of Foreign Workforce 105 [Figure IV-6] Implementation Process of General Employment Permit System 120 [Figure IV-7] Employment Process Chart for E-9 Foreign Workers 121 [Figure Ⅴ-1] Implementation Process of Special Case Employment Permit System 137 [Figure Ⅴ-2] Employment Process Chart for H-2 Foreign Worker 138 [Figure VI-1] Foreign Workforce Importation Process Comparison between E-9 and H-2 148

7 Foreword Korea has realized rapid economic growth over the past 50 years. GNP per capita rose from 142 USD in 1963 to 28,338 USD in Economic growth was accompanied by the resolution of the unemployment problem, with unemployment rates dropping from 8.2% in 1963 to 4.4% in 1970 and again to 2.5% in The manpower shortage became severe in the early 1990s, with the lack of low-skilled labor especially pronounced. Small/medium-sized businesses in the so-called 3-D(difficult, dangerous and dirty) industries found it difficult to find workers. However, the country as a single-blood state with almost no racial mixing in 5,000 years history, was hesitant to invite foreign manpower. As a result, the number of illegal sojourners rose sharply. Despite the need to invite low-skilled foreign labor, much social consensus was necessary for the Employment Permit System to be implemented. First, in 1993, the Industrial Trainee System was adopted. The Industrial Trainee System was an expansion of the trainee system for overseas-invested corporations to include some small-and medium-sized manufacturing companies. Participants were trainees in standing but were employees in all practical senses. The Industrial Trainee System was later replaced by the Training Employment System, but the labor market s demand for low-skilled foreign workers was far

8 from met, and the number of illegal sojourners continued to rise. Despite the mass layoffs resulting from the Asian financial crisis that broke toward the end of 1997, the demand for low-skilled foreign workers remained. Although trainees were afforded equal treatment as domestic workers, disputes related to the violation of labor and human rights laws continued until the introduction of the Employment Permit System, which acknowledged low-skilled foreign workers as laborers in Under the Employment Permit System, the Training Employment System was maintained until it was absorbed into the Employment Permit System in In the early 20th century when Korea was occupied by Japan, many Koreans emigrated to China, Russia, etc. For these overseas Koreans, an Employment Management System that permitted their employment in eight service sector job categories was adopted in Following the introduction of the Employment Permit System, the Employment Management System was operated as a special-case system under the Employment Permit System. The Employment Management System became the Visiting Worker System in The General Employment Permit System for foreign workers requires that an employment contract be signed prior to entry into the country and restricts changes to workers place of employment. In contrast, the Special Case Employment Permit System (Visiting Worker System) does not require an employment contract prior to entry and allows workers to move among different places of employment. Since the adoption of the Employment Permit System, the costs of sending workers have shrunk drastically, reducing the number of illegal sojourners in the country, and foreign workers have also been guaranteed rights equal to those of domestic workers. Many policy improvements were made, including

9 reinforcements to job ability evaluations when selecting foreign workers. Nonetheless, voices that call for continued modifications to the system including the easing of restriction on moving among places of employment and increased protection of human and labor rights still remain. The need for the introduction of an employment levy system is being raised; with previously low-skilled workers now becoming skilled laborers ten years after the system s adoption, the possibility and need for such persons permanent residence are being raised. Since 2007, the Human Resources Development Service of Korea has been administering TOPIK (Test of Proficiency in Korean-a language ability test) in 15 countries which send workers to Korea, having jurisdiction over cooperation with sending institutions for the importation of foreign workers. It has been providing support for the sojourns of foreign workers after they enter the country. This book is intended to further understanding of the Employment Permit System among the policy officers and other related personnel of sending countries. It was written by Prof. Dr. Young-bum Park, current President of the Human Resources Development Service of Korea, a key player in the establishment of low-skilled foreign labor policy even before the adoption of the Employment Permit System, and Dr. Myung-hui Kim of the Human Resources Development Service of Korea. May 2016 Young-bum Park President Human Resources Development Service of Korea

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11 Chapter Ⅰ Korea s Temporary Low-skilled Foreign Worker Policy: An Overview

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13 Chapter Ⅰ. Korea s Temporary Low-skilled Foreign Worker Policy: An Overview _3 Korea s Temporary Low-skilled Foreign Worker Policy: An Overview In the past, the number of economically active people in Korea heavily outweighed the old aged population because Korea had both a high birthrate and a high mortality rate. Beginning in the 1950s, Korea underwent a series of processes including industrialization, urbanization and the gradual disappearance of farming communities. This led to a large number of people being left without jobs in major cities. Like other developing nations, in order to find work for its citizens Korea attracted foreign businesses into the country while at the same time sending Korean workers abroad. At the time Korean workers were willing to take on- 3D (difficult, dangerous and dirty) -occupations and left Korea seeking work overseas in such places as West Germany, Vietnam and the Middle East. Miners and nurses were sent to West Germany from 1960 to 1976, while from 1966 to 1973 Korean workers employed in Vietnam were mainly engaged in, among other practices, the supply trade for American troops and the construction of military facilities. In 1974 a portion of the Koreans employed at foreign businesses on the ground in Vietnam were deployed to Riyadh, Saudi Arabia, to work at a construction site for the Vinnell Corporation. This marked the beginning of Korean overseas work in the Middle East. Only 395 Korean

14 4 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System workers were employed in the Middle East in 1974, but this number rapidly increased each year, reaching 151,583 workers by 1982 (Seol Dong-hoon, 1998: 92). Remittances from Koreans employed overseas at that time played a crucial role in the growth of Korea s GDP and served as the basis for its economic takeoff. Korea s economy experienced continuous development until the mid- 1970s, after which time the unlimited supply of Korean manpower came to an end and partial workforce shortages began to emerge centered around the domestic construction industry (Seol Dong-hoon, 1998). Industry was restructured around the heavy chemical industry from the 1980s in particular, and in 1987 democratization expanded thanks to the struggle of Korean laborers, leading to a great improvement in domestic work environments and wage levels. The beginning of the influx of foreign workers coincided with this strengthening of Korean democratization, which also initiated the ensuing wage increases and improvement of working conditions. The increase in the standard of living and education levels of Koreans led to a reluctance to work at small-and medium-sized businesses and engage in 3D jobs. This resulted in severe labor shortages in industries such as labor intensive manufacturing, construction and mining. With the emergence of chronic blue collar labor shortages, small-scale businesses began to demand the importation of a foreign workforce. However, the government and the organized labor sector both feared an overall negative impact in terms of employment opportunities and employment conditions for Koreans. The government held fast to the policy of banning foreign workers for any roles except expert and technical positions that Koreans themselves could not carry out. As the government failed to provide a legal foothold for the importation of

15 Chapter Ⅰ. Korea s Temporary Low-skilled Foreign Worker Policy: An Overview _5 low-skilled foreign laborers despite the increasingly serious shortage of blue collar manpower, the illegal employment of workers from China, Southeast Asia and South Asia increased. The majority of foreign manpower in Korea at this time comprised illegal and undocumented migrant workers who entered on tourist or visitor visas. The Korean government of the time used the 1988 Seoul Olympics as an opportunity to relax immigration restrictions and readily gave Chinese Koreans visitor visas as part of their Nordpolitik strategy. As a result, the number of illegal migrant workers increased uncontrollably from 1987 onward. In response, on October 26, 1991 the government established the Industrial Technical Training Visa Issuance Guidelines for Foreigners and introduced the Overseas Investment Firm Industrial Trainee System in November that year for Korean firms that invested capital abroad. The Overseas Investment Firm Industrial Trainee System was intended to be a training system for bringing foreign workers as trainees so they could learn technical skills and workplace competence. However, it became an expedient tool for using low-skilled foreign trainees for labor. Foreign trainees were mainly provided to Korean firms with factories abroad, leading to increasingly fierce demands from small-scale domestic businesses for permission to bring in foreign manpower. The Organization-recommended Industrial Trainee System was implemented in November 1993 to allow normal businesses to bring in foreign trainees. Though in principle foreign trainees were defined as workers who would receive training to foster industrial skills and competence, in reality the majority of foreigners who entered the country under the pretext of such training worked in fields unrelated to the supposed training content. The main

16 6 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System controversy surrounding the Industrial Trainee System was that the trainees brought into Korea were illegally employed in the domestic manufacturing industry. However, since such workers were not recognized by the Labor Standards Act, human rights violations by abusive employers, including delayed payments and labor exploitation, also occurred in no small measure. The government was concerned about criticism that the system was being commonly abused and attempted to impose strict limitations on the importation of foreign trainees. However, the limitations imposed on the legal foreign workforce conversely became the impetus for mass levels of illegal foreign immigration and employment. As a result, in April 2000, the government introduced the Training Employment System, which would allow foreign trainees who passed a qualifications test after two years of training to be hired domestically as legal workers for a one-year period. In roughly the same period cases of employment fraud involving Chinese Koreans became a prominent social issue and an Employment Management System was introduced to permit the hiring of foreign Korean nationals in the service sector in December After continued efforts to improve the system for bringing in foreign labor and longstanding attempts to implement an employment permit system, the Act on the Employment of Foreign Workers was passed in June 2003, and the Employment Permit System took effect on August 17, The existing Industrial Trainee System was operated in parallel with the Employment Permit System until the end of It was fully abolished on January 1, 2007 and merged with the Employment Permit System. Since then the Employment Permit System became the sole avenue for bringing in low-skilled foreign labor for domestic use. The Employment Management System that granted

17 Chapter Ⅰ. Korea s Temporary Low-skilled Foreign Worker Policy: An Overview _7 Foreign Korean nationals visiting resident status and permitted their domestic employment was absorbed into the Employment Permit System under the title Special Case Employment Permit System. The Employment Management System was replaced by the Visiting Worker System on March 4, 2007 to allow foreign Korean nationals without domestic ties to gain employment in Korea, further opening the door to such ethnic Koreans. There were approximately 1.64 million foreigners sojourning in Korea at the time and of these 450,000 were brought in as manpower through the Employment Permit System (as of April 2014). The majority of non-professional foreign labor was employed in the manufacturing industry, while since 2008 there has been a rapid increase in foreign workers employed in the agriculture, livestock and fisheries sectors. The introduction of the Employment Permit System enabled small-and medium-sized businesses suffering labor shortages to legally employ low-skilled foreign workers. It also allowed the public sector to put a stop to all kinds of corruption in the sending process due to the intervention of private organizations by directly managing the importation of foreign workers based on agreements with sending countries. The system has also put a stop to the permanent residence of low-skilled foreign workers by introducing measures limiting foreign laborers to three years of employment (allowing for an additional one year and ten months if extended; a total of four years and ten months), after which they must return to their home countries. Most notably, the Employment Permit System applies national labor law to foreign workers in a manner equal to domestic employees, making it a model for other nations in terms of eliminating unfair discrimination. The implementation of the Employment Permit System was meaningful because it made the process of

18 8 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System bringing low-skilled foreign workers transparent and legal (Yoo Gil-sang et al., 2011). Recent surveys show that foreign workers are highly satisfied with the Employment Permit System as a whole (Seol Dong-hoon and Go Jae-hoon, 2015a). However, the increased number of low-skilled foreign labor is leading to concerns about reductions in job opportunities for Korean workers and the restructuring of small-and medium-sized businesses. The number of foreigners holding worker visas in Korea greatly increased through the introduction of the Employment Permit System in 2004 and the Visiting Worker System in 2007, to the extent that by the end of August 2014 foreign workers numbered approximately 1.71 million, or 3.4% of the Korean population (Lee Gyu-yong et al., 2014). There are two particularly noteworthy points that have become clear since the implementation of the Visiting Worker System in March The first is that foreign Korean nationals account for a higher percentage of the non-professional workforce in Korea than other nationalities. Foreign Korean nationals make up the largest group of sojourners in Korea (34.7%). They are followed by immigrants with permanent residency (13.2%). The second noteworthy point is that the number of foreign workers permanently settling in Korea is increasing (Park Young-bum et al., 2010; Lee Gyu-young et al., 2014). There is also an increasing variety of sojourning foreigners. Though mainly simple laborers, sojourners also include married immigrants, international students and investors (Lee Gyu-young et al., 2014). A study of the economic activity of sojourning foreigners reveals that the employment rate of married immigrants is lower relative to other groups. Permanent residents and foreign Korean nationals are employed at rates of 66.1% and 60.8%, respectively, while married immigrants are employed at a rate of just 44.9% (Lee Gyu-yong et al., 2014).

19 Chapter Ⅰ. Korea s Temporary Low-skilled Foreign Worker Policy: An Overview _9 The most recent Korean policy for managing the foreign workforce led to the establishment of a system for distinguishing low-skilled and professionally skilled human resources. The employment of low-skilled foreign workers who enter the country through the Employment Permit System leads to a number of social costs, including preventing the restructuring of industry and their long-term settlement in Korea. To avoid these social costs and protect the labor market, the policy aims to limit the scale and term of low-skilled worker employment and ensure they are repatriated after their employment terms finish. To bring immigrants who will help strengthen the economy upon entry, the government aims to attract professional workers under the categories of Professorship (E-1 visa), Foreign Language Instructor (E-2 visa), Research (E-3 visa), Technological Transfer (E-4 visa), Professional Employment (E-5 visa), Arts and Performance (E-6 visa) and Special Occupation (E-7 visa). Since the introduction of the Gold Card System in November 2000, the government has been working to strengthen the pull factors for such skilled immigrants by making it easier to enter the country, extend sojourn periods, receive a visa, etc. Phenomena such as the increase in international marriage, the expansion of free trade agreements, development of transportation methods, the advancement of informatization and emerging imbalances in the supply and demand of specific labor fields between nations all serve as catalysts for the influx of foreign workers. Furthermore, because Korea s birthrate has fallen below all other OECD nations, it is expected that the shortage of economically productive people will become even more serious as time passes. Not only will the inception of a super-aged society limit the growth potential of the Korean economy, it will also usher in overall changes to the structure of the

20 10 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System labor market, public finances, the personnel management systems of businesses and the quality of individual lives. Therefore, it appears the extensive use of foreign human resources will be vital in the future. Foreign workers now play a crucial role in the Korean labor market and the Employment Permit System must become a more comprehensive system in response to the structural changes of this market.

21 Chapter Ⅱ Changes to Korea s Temporary Low-skilled Foreign Worker Policy

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23 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _13 Changes to Korea s Temporary Low-skilled Foreign Worker Policy It has been more than 20 years since foreign workers began entering Korea looking for work. Around 1987, many people from China, Southeast Asia, etc. began entering Korea on tourist or visitor visas and started working illegally as undocumented laborers and overstaying their permitted sojourn periods. This chapter will explain changes in the process of bringing foreign manpower running from the period when foreign workers began to be brought into Korea with the official status of trainees through the Industrial Trainee System, to the introduction of the Employment Permit System that legalized the employment activities of foreign laborers. Changes to Korea s temporary foreign worker policies are summarized in <Table II-1>. <Table Ⅱ-1> Changes to Korea s Temporary Foreign Worker Policies Year Systems Main elements 1980s - Demands for permission to legally employ low-skilled foreign workers to address manpower shortages centered on smalland medium-sized businesses. Plans shelved due to opposition from the organized labor sector

24 14 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System Year Systems Main elements Introduction of the Overseas Investment Firm Skill Trainee System (November) Introduction of the Organizationrecommended Industrial Trainee System (November) 6 months of training Can be extended for another 6 months As many as 10,000 trainees for small and medium businesses in 10 manufacturing sectors Push to implement the Employment Permit System Introduction of the Training Employment System (April 1) Training employment period expanded (April 18) Plan to Improve the Foreign Workforce System developed (July 18) Implemented a total quota management system for trainees, training employees (August 29) Law on Foreign Worker Employment Permission and Guaranteeing Human Rights (Draft) submitted to the National Assembly (November 13) Despite efforts to introduce the Employment Permit System, opposition from some governmental departments including the Small and Medium Business Administration and the Small and Medium Business Alliance Central Committee, among others, thwarted the attempt 1 year of employment permitted after 2 years of training As of 2002 trainees were permitted 2 years of employment and 1 year of training Total quota for trainees increased from 84,500 persons to 145,500 persons Planning Group for Improving the Foreign Workforce System established and operated under the jurisdiction of the Office for Government Coordination (December) Implementation of the Employment Management System for foreign Korean nationals (December 6) Granted foreign Korean nationals over the age of 40 with familial ties in Korea the right to become employed in 8 different types of service sector businesses

25 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _15 Year Systems Main elements Abolished the Industrial Trainee System, and announced plans to implement the Employment Permit System for foreigners (March 29) 2003 Agreement in the National Assembly s Environment and Labor Committee to consider an amendment for the concurrent operation of the Industrial Trainee System and the Employment Permit System Announced the establishment of the Act on the Employment of Foreign Workers (August 16) 2004 Enforcement of the Employment Permit System (August 17) Initial entry of 92 workers from the Philippines Employment Management System made to operate under the Employment Permit System for special cases (August) 2005 Expanded the number of foreign employees permitted to be hired at workplace with 4 employees or fewer (2 foreigners 5 foreigners) Added Departure Guarantee Insurance, Repatriation Cost Insurance, Guarantee Insurance and Accident Insurance to the Minister of Labor s foreign worker- related services (November 30) Abolished the Industrial Trainee System, merging it with the foreigner Employment Permit System (January 1) 2007 Newly established the Visiting Worker System (March) Multiple-entry visa valid for 5 years allowing for up to 3 years of employment after single entry; eligibility expanded to overseas Koreans without domestic domicile

26 16 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System Year Systems Main elements Visiting Worker Korean National Construction Employment Registration System (H-2) implemented Issuance of construction employment certificates to candidates who have requested construction employment registration and completed vocational training 2009 Revision of the Act on the Employment of Foreign Workers (Sept. 16) Workers who have completed their 3-year employment period given the right to extend their work period another 2 years at the request of their employer (limited to 1 instance) without leaving the country Some relaxations in workplace changes Visiting Worker (H-2) visa holders granted eligibility to receive Overseas Korean (F-4) status Though limited to 1-year contract periods, they could agree on contract periods of a maximum of 3 years "at the agreement of the parties involved" 2010 Extended required period for attempted recruiting of domestic Korean workers Originally 7 days (3 days in exceptional cases), expanded to 14 days (7 days in exceptional cases). Only employers actively attempting Korean worker recruitment (conducting interviews, etc.) could have period reduced to 7 days Made registration period for extension of employment more reasonable Changed required employment training time from 20 hours to 16 hours or more Between 45 and 15 days prior, depending on the employment period length 2011 Modified the required period for employment extension registration for foreign workers who completed their 3-year employment term Changed from 45 days to 7 days prior to end of employment term Expanded the number of employers eligible for Departure Guarantee Insurance trust funds based on the Severance Payment Plan

27 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _17 Year Systems Main elements Adoption of Special Case Sincere Worker Re-entry System (July 2) Preventing illegal sojourns of persons whose permitted employment periods have expired, and ensuring utilization of skilled manpower 2012 Improvements in job placement system for workers reassigned to new workplace (July 2) List of prospective employers no longer provided; reinforcement of job placement functions of employment centers 2013 Points system for foreign workforce allocation adopted Points system for foreign manpower allocation expanded to all industries Eligibility restrictions for construction employment registration of overseas Koreans lifted Expansion of opportunities for the payment of dormant insurance benefits Incheon Airport insurance benefits payment service begun (October 1) First-come, first-served allocation Points system on experimental basis * 1,000 persons in agriculture and livestock/ 530 persons in fishing/ 330 persons in construction Manufacturing, agriculture & livestock, fishing, construction, service industries Single management system under total employment count (55,000 persons) 1 Insurance Company call center 16 Customer Support Centers 2014 Revision of the Act on the Employment of Foreign Workers (Announced January 28, 2014, Enforced July 29) Extension of claims deadline for foreign workers insurance benefits (Departure Guarantee Insurance & Return Guarantee Insurance): 2 Years 3 Years Establishment and operation of Dormant Insurance Benefits Management Committee Stipulation of payment of Departure Guarantee Insurance benefits within 14 days of claim if claimed after departure 2015 Adoption of skills tests Adoption of points system for worker selection Job abilities included in worker evaluations for candidates in prospective foreign worker list In job applicants candidate evaluation, evaluating skills level, work experience, training, qualifications, and job abilities, in addition to Korean language abilities

28 18 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System 1. Overseas Investment Firm Industrial Trainee System Beginning in the latter half of the 1980s, chronic work shortages in 3D industries and small-and medium-sized businesses became more severe. In response to the continued assertion that an influx of foreign labor was necessary, in November 1991 the government decided to introduce the Overseas Investment Firm Industrial Trainee System centered on Korean firms that invested overseas. In principle, the Overseas Investment Firm Industrial Trainee System was created based on the pure motive of fostering the skills and capabilities of workers from developing countries and ultimately increasing economic cooperation with their homelands. Foreign workers were granted overseas investment firm industrial trainee status when they had worked more than six months for a Korean subsidiary in their home country undertaking production work but were unable to acquire the skills needed for the work site or found it difficult and required further training. Industrial trainees were granted a period of six months for training, but this period could be extended once for another six months. On December 28, 1993 the Foreign Industrial Skills Training Visa Issuance Guidelines were amended to extend the maximum sojourn of overseas investment firm industrial trainees to two years instead of the original one year. In other words, as long as overseas investment firm industrial trainees received permission to extend their sojourn period from an immigration office before their sojourn period ended, they were able to stay for a maximum of two years. When their training period ended they were required to return to the overseas subsidiary upon repatriation. Because overseas investment firm industrial trainees were given Industrial Training (D-3) sojourn status, they were not considered persons able to

29 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _19 engage in employment activity under the Immigration Control Act. However, as soon as the Overseas Investment Firm Industrial Trainee System was introduced, overseas investment firms started using industrial trainees as a means to provide cheap labor to their domestic mother companies. The lack of protection for industrial trainees under labor law meant they could be subject to a variety of human rights violations from some abusive employers, including assault, long working hours, low wages, forced labor and payment delays. On November 23, 1999, the government enacted the Guidelines for Protecting Overseas Investment Firm Industrial Trainees to resolve these issues, and revised them to ensure industrial trainees were only used to supplement manpower in overseas subsidiaries, not domestic mother companies, and that they were also subject to some clauses in labor law. The rights of industrial trainees were still not greatly improved despite these measures, and, because they were used like normal workers as their sojourn periods were extended, the rate of foreign worker desertion from their assigned workplace remained as high as ever. To improve the weaknesses of this system, on July 18, 2002, the government developed the Measures to Improve the Foreign Workforce System, which focused on strengthening the standards for qualification as an overseas investment firm industrial trainee and preventing illegal sojourns stemming from workplace desertion. With the introduction of the Measures to Improve the Foreign Workforce System, employers were barred from inviting industrial trainees if they employed foreign workers illegally sojourning in Korea or industrial trainees who deserted their assigned training location within two years of applying for a certificate confirming visa issuance. They also were not permitted to bring such trainees if they were operating a location where 20% or more trainees

30 20 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System deserted without proper justification or were found to have been responsible for violating worker rights (within one to two years of an incident). In September 2003 the government established the Guidelines for Granting and Managing Certificates Confirming Visa Issuance Related to Overseas Investment Firm Industrial Trainees. These guidelines concretely clarified the qualifications required for training firms and industrial trainees to ensure the system remained true to the original training goals of the Overseas Investment Firm Industrial Trainee System and established several strong measures to prevent industrial trainees from being used as laborers. 2. Organization-recommended Industrial Trainee System One of the problems with the Overseas Investment Firm Industrial Trainee System was that the designated businesses permitted to use foreign workers were firms directly investing in foreign countries, firms recognized by the Minister of Justice to require industrial trainees because they are businesses exporting technology to foreign countries and firms exporting industrial equipment to foreign countries. This meant small-and medium-sized businesses that actually faced manpower shortages were excluded from the opportunity to use foreign workers. In November 1993 the government formed a group of commissioned employers called the Committee for Revising Foreigner Industrial Skills Training. Based on their recommendations, the government introduced the Organization-recommended Industrial Trainee System that would manage industrial training. Through the Organization-recommended Industrial Trainee System, a

31 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _21 group of employers comprising a training recommendation committee provided recommended firms with foreign industrial trainees for domestic use. With the implementation of the Organization-recommended Industrial Trainee System between September 1992 and April 1993, as many as 10,000 industrial trainees were brought based on the recommendation of the Minister of Commerce and Industry and were employed by small-and medium-sized businesses, with ten manufacturing sectors that suffered serious manpower shortages (dyeing, plating, heat treatment, machinery, glass, leather, electronic and electrical, etc.) given preference. However, this industrial training system based on the recommendations of the Minister of Commerce and Industry came to a stop before long for a number of reasons, including the domestic economic downturn, issues with the management of industrial trainees and the discontinuation of recommendations after reaching 10,000 trainees (Lee Hong-ji, 1994). After the Kim Young-sam administration came to power in 1993, the government revealed a plan to make all self-reporting illegal sojourners into industrial trainees in order to address the issues with the above-mentioned trainee system and to solve the worker shortages facing small-and medium-sized businesses. On November 24, 1993 the Committee for Revising Foreigner Industrial Skills Training decided to combine the 1992 self-reported illegal sojourners with the existing trainees recommended by the Minister of Commerce and Industry to make 20,000 industrial trainees in total. On January 4, 1994 the Minister of Commerce and Industry announced the plan to assign authority over industrial skills training to the Small and Medium Business Alliance Central Committee and bring industrial skill trainees into the country after establishing contracts with sending institutions

32 22 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System in trainee s home countries. The Small and Medium Business Alliance Central Committee expanded the number of manufacturing industries that could receive trainees from 10 to 21 and lengthened the maximum training period to two years. The quota from each country was modified based on the performance of particular nationalities during operation of the Industrial Trainee System. For example, Nepal, Myanmar (both of which showed a 40% workplace desertion rate) and Iran (which had comparatively smaller demand) were excluded from the list of developing countries that were sources of trainees. In 1996 the food manufacturing industry was added to the list of business types that could take part in foreigner industrial skills training, while Mongolia and Kazakhstan were added to the nations that could supply trainees. The training period was also extended to a maximum of three years. With consideration for their increasingly serious manpower shortages, nearshore and coastal fishing vessels were allowed to bring industrial skill trainees in 1996 and coastal vessels and the construction industries were also given permission in 1997 (<Table Ⅱ-2>). <TableⅡ-2> Changes to Quotas and Sojourn Periods of Industrial Trainee System Sectors with increasing trainees Quota (unit: person) Sojourn period 1993 Manufacturing 20,000 2-year training 1994 Manufacturing 30,000 2-year training 1995 Manufacturing 50,000 2-year training Manufacturing, nearshore and coastal fishing vessels Manufacturing, inner harbor shipping, construction 80,000 3-year training 82,800 3-year training Source: Ha Gap-rae and Choi Tae-ho (2005: 224)

33 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _23 Much like the Overseas Investment Firm Industrial Trainee System before it, the Organization-recommended Industrial Trainee System was a system that, in principle, aimed to foster advanced skills and capabilities in trainees from developing countries to increase industrial technical cooperation between Korea and source nations. However, companies took advantage of the system to apply trainees to non-training activities after their entry into Korea. Because these industrial skill trainees were not workers in a legal sense and therefore were not protected by labor law, it came to light that they were often subject to late wage payments, assault, long working hours and other human rights violations. As a result, this system was constantly criticized from its early stages because it failed to actually train foreigners brought into the country as industrial trainees and because such trainees were misused as laborers. Furthermore, though the training recommendation group s role was to prevent the inappropriate behavior of firms assigned to conduct training, the recommendations made by the group were not legally binding and they could not take any special measures beyond canceling a training recommendation or reassigning a trainee to another training firm after considering their appeal. Corruption involving the sending of foreign workers also emerged as an issue with the Industrial Trainee System. Sending institutions were responsible for recruiting and selecting industrial trainees. However, private brokers became involved in the selection process and demanded excessive commission payments from those would-be trainees even though they were already chosen by the training recommendation group. Foreign workers who wanted to immigrate to Korea for work had no choice but to pay excessive commission to these brokers. There were many cases where these foreigners remained in Korea after their training period, taking on

34 24 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System the status of illegal sojourners to continue working in order to compensate for the money spent on brokers commission. Moreover, because the Industrial Training System also introduced a points system to determine which firms would be granted the authority to hire foreign workers, it became difficult for small-sized businesses that desperately needed foreign manpower to be assigned foreign trainees. This ultimately led some small-scale businesses that were excluded from such assignment standards to use illegal foreign workers to address their manpower shortages. In the face of heightened criticism that foreigners were being hired as trainees but used for labor, a movement toward abolishing the Industrial Trainee System and legalizing the employment of foreign workers began. In 1996 the Foreign Worker Employment Law and the Law on Employment and Protection of Foreign Workers were presented as legislative bills at the National Assembly, but were abandoned with the termination of the 15th assembly session. In April 1997 the Ministry of Employment and Labor established the Foreign Worker Employment Committee comprised of laborers, employers, government officials and public interest representatives and once again pushed for legislation to introduce a system for employment permit. However, this effort also ended in failure.

35 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _25 3. Training Employment System In 1997 in response to the slowdown of rapid economic growth, the Korean government put a stop to the importation of industrial skill trainees in the manufacturing sector. As the economy fell into a serious downturn following the foreign exchange crisis at the end of 1997, the importation of new industrial skill trainees virtually came to a halt and trainees repatriated at the end of their contract terms were also replaced at a reduced rate. After 1998 the number of industrial trainees fell dramatically. At the time, the Immigration Control Act and the Immigration Control Act Enforcement Ordinance were established to bring the Industrial Skill Trainee System under legislative control, and the Foreign Training Employment System was introduced based on Article 19-3 of the Immigration Control Act and Article 24-5 of the Immigration Control Act Enforcement Ordinance (Seol Dong-hoon, 1998: 127). The Foreign Training Employment System granted Internship (E-8) sojourner status to industrial trainees who completed the fixed-term training process. It was designed to allow such foreign workers to develop skills and capabilities while employed at a workplace. The introduction of the Training Employment System allowed foreign industrial trainees to be employed as workers for one year after completing their two-year training period. The Training Employment System applied to workers who entered the country after April 1, 1998 as industrial skill trainees, meaning the first foreign workers issued training employment visas received them on April 1, However, the Training Employment System was criticized as an extension of the Industrial Trainee System because it applied the same immigration control legislation and measures to training employees as it did industrial trainees (<Table II-3>).

36 26 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System <TableⅡ-3> Changes to Quotas and Sojourn Periods of Training Employment System Sectors added Quota (unit: person) Sojourn period 2000 Nearshore and coastal fishing vessels 84,500 2-year training, 1-year employment 2002 Agriculture and livestock, total quota system intro 145,500 1-year training, 2-year employment Source: Ha Gap-rae and Choi Tae-ho (2005: 224) At the end of 2000 yet another attempt was made to introduce a system for employment permit through the Law on Foreign Worker Employment and Management. This, too, ended in failure due to opposition from the business sector. In response, the government focused on improving the Industrial Trainee System, and on December 20, 2001 announced a comprehensive plan of improvement. The main improvements were as follows: The training and employment periods were amended from two-year training, one-year employment to one-year training, two-year employment in order to reduce training time for the sake of manpower provision The system for recommending training firms was abolished to allow the activation of the Training Employment System The training recommendation group had to receive the consent of the related ministry to select a sending institution and allocate trainees, while the Ministry of Employment and Labor undertook activities related to the management of training employment and the protection of their labor

37 Chapter Ⅱ. Changes to Korea s Temporary Low-skilled Foreign Worker Policy _27 rights. This clarified the respective responsibilities and jurisdiction of the related ministries and the training recommendation group The approach by which overseas sending institutions made the final selection of trainees was changed to one where the training recommendation group received a certain number of recommendations from overseas sending institutions and final selection was made at random by a computer. This reduced corruption during the sending process Reports of human rights violations were subject to an on-site investigation within seven days of receipt and the allocation of trainees to firms found to have committed such violations was restricted Different quotas per country were allocated the following year after analysis of foreign industrial trainee workplace desertion rates A trainee Korean language aptitude test was implemented on a trial basis As a follow-up measure, the Foreigner Industrial Labor Policy Deliberation Committee developed the Foreign Industrial Trainee System Improvement Policy II on August 29, 2002, introducing the following additional improvements: Quota for industrial trainees expanded to 145,500 in order to prevent manpower gaps as a result of voluntary repatriation by illegal sojourners Agriculture and livestock industry made one of the sectors permitted to bring industrial trainees A total quota management system implemented for managing the overall maximum number of foreigners entering Korea as industrial trainees

38 28 _Korea s Temporary Low-skilled Foreign Worker Program: Employment Permit System (including industrial trainees, training employees and deserters) The industrial trainee agency management system abolished and domestic branch offices established for sending institutions to manage industrial trainees Industrial trainee allocation restrictions placed on firms employing illegal sojourners Training employment period for construction firms reduced to a one-year training, one-year employment approach to account for the industry s sensitivity to economic changes In December 2002 the Minister of Employment and Labor enacted the Foreign Training Employee Protection and Management Regulations to modify the rules on such issues as conditions for training employment, training employment contracts, reasons and processes for workplace changes, and training employee counseling. Despite continued efforts to improve the Industrial Trainee System, the issues surrounding foreign workers, such as the employment of illegal sojourners, remained fundamentally unresolved. Illegal sojourners accounted for 80% of foreign workers in Korea and the structural problems (expedient misallocation of foreign manpower, corrupt sending practices, etc.) along with the issues of workplace desertion and human rights violations (late wage payment, assault, etc.) developed into greater social costs. In November 2002 the government responded by advancing legislation based on the Law on Employment and Protection of Foreign Workers 1) first introduced in 1996, 1) Submitted to the National Assembly in 1996 but failed to be passed