[Chatham House Roundtable] South Korea Facing Population Extinction Crisis... Need to Prepare Immigration Policies to Supply Quality Labor Force

Working-Age Population Shortfall Could Reach 12.5 Million by 2050
Concerns Over Loss of Global Competitiveness Due to Talent Pool Shortage
Infrastructure Preparation Needed to Attract Quality Immigrants
Unified Immigration Policy Through Launch of Dedicated Provincial Agency

Editor's NoteConcerns are emerging that the low birthrate crisis could even erode South Korea's 'rosy future.' Recently, the Korea Future Research Institute projected that in 20 years, the domestic working-age population will decrease by up to 12.5 million. South Korea, ranked only 29th in the world by population, was able to become a developed country by focusing intensively on specific high value-added industries such as semiconductors and IT, nurturing talent specialized in these fields. However, warnings persist that in the future, the absolute pool of talent will be insufficient, causing South Korea to disappear from the global stage. This is due to the undeniable importance of economies of scale created by absolute population numbers. Accordingly, voices from the political sphere and civil society are increasingly calling for South Korea to actively adopt immigration policies to fill labor shortages. Yet, South Korea's immigration policy is still immature, and social consensus on the purpose and methods of immigration has not been reached. Legislation for an immigration management agency to oversee the vast discourse on immigration appears to be repeatedly postponed due to conflicting interests between ruling and opposition parties. On May 30th, Asia Economy held a 'Chatham House Roundtable' at its headquarters in Jung-gu, Seoul, to share the necessity of immigration as a response to the national challenge of low birthrate and to discuss possible measures with experts. The roundtable included Lee Gyu-yong, Director of Employment Policy Headquarters at the Korea Labor Institute; Lee In-sil, President of the Korea Future Population Research Institute; and Jeong Ki-seon, a member of the Ministry of Justice's Immigration Policy Committee. The experts emphasized that since immigration incurs integration costs, it must align with national interests and that a refined selection system is necessary to recruit high-quality talent. The roundtable followed the Chatham House Rule, disclosing the list of participants but keeping individual remarks anonymous.

Chatham House. Photo by Dongju Yoon doso7@

Q: Is immigration necessary to respond to South Korea's population crisis caused by low birthrate and aging?

A: Immigration into South Korea will be necessary as labor shortages become more visible. This is due to the reality of population decline and the gradual decrease of the working-age population. However, it is necessary to distinguish between two concepts of immigration: foreigners working short-term and then leaving, and those obtaining permanent residency and fully settling in the community. Most current discussions in South Korea lean toward the former, supplying labor short-term to address population decline. In the future, the concept should expand to granting permanent residency when it is certain that foreign workers become skilled technicians, earn sufficient income in South Korea, and do not incur social costs from cultural and value integration. This message needs to be well communicated to the public.

B: I agree. To introduce immigration as a permanent residency concept, jobs close to the national average income must be provided. However, South Korea currently lacks the infrastructure to achieve this. Also, sending immigrants to low-wage jobs in 'population extinction' areas will likely cause them to want to move to Seoul or other metropolitan areas, creating a counter-effect.

C: It is not yet time to actively discuss immigration policy as a settlement measure. Although the population is declining, there is still a large pool of idle labor. Introducing such immigration policies now would mean that when the working-age population decline crisis fully materializes, immigrants will also age, losing effectiveness.

B: Nevertheless, South Korea must seriously consider immigration because the economies of scale created by the working-age population cannot be ignored. South Korea has built global market advantages through selective concentration in some high value-added industries like semiconductors and IT. The problem is that by 2050, the working-age population will be short by at least 7.6 million and up to 12.5 million. If this becomes reality, the number of industries where South Korea can focus and specialize will greatly decrease. There is serious concern that South Korea will completely lose competitiveness on the international stage. Therefore, it is necessary to define immigration targets, refine the selection system, build public trust, and promptly accept immigration.

Q: What kind of immigrants should be accepted and how should the selection system be established?

C: Immigration policy must be strictly selective. Income level and language ability can be considered as evaluation criteria. However, judging from the current immigration system in South Korea, the likelihood of people needed by the domestic labor market entering is not very high. Now is the time to prepare infrastructure to attract good immigrants.

B: The most important priority in immigration policy should be economic perspective. This is because when foreign labor is accepted, the entire human being?including social and cultural aspects?comes along. Integration costs inevitably arise. Detailed criteria should be established by industry sector to reduce such costs.

C: South Korea is characterized by a shortage of labor in the blue-collar market rather than the white-collar market. Domestic technology is strong in manufacturing and construction, but the problem is that production sites are aging and new labor supply is not coming in. Labor supply to skilled technician markets must be realized within the next 5 to 10 years to prevent industrial stagnation. However, the current foreign visa policy in South Korea does not cover this market. For this sector, it is necessary to consider granting settlement status and even permanent residency to foreign workers who can grow into team leaders or skilled technicians.

A: A system is needed to identify which occupations require what level of technical skills. Also, programs to properly train foreign workers must be included in policy. When forecasting labor supply and demand, factors such as industry and technological changes must be comprehensively considered. The effectiveness of policy will vary greatly depending on how well-structured the immigration system is.

C: There are several advantages to defining labor-needy sectors and allowing foreigners to enter. First, it has a promotional effect by sending the message to the public that foreigners entering Korean society is not necessarily bad. Second, it encourages potential foreign workers to prepare the qualifications needed to enter Korea on their own.

Q: What is the appropriate scale of immigration?

C: First, labor supply and demand forecasts are necessary. This is to reduce the possibility of costs arising if immigrants cannot find jobs. Immigrants must meet demand. Since industrial and technological changes are rapidly evolving, segmented supply and demand estimates over 5 to 10 years are needed.

A: Immigration is not about bringing in the absolute domestic population shortage from overseas. The basic model should be young foreign workers coming to work and then returning to their home countries when they age. This insight comes from the F-4 (Overseas Korean) visa. Currently, most foreigners in South Korea are ethnic Koreans from China who entered via the F-4 visa. The key point of the F-4 visa is that it can be renewed repeatedly. The problem is that they are also aging along with Korea. This does not align with the national interest purpose of introducing immigration.

C: Exactly. The barometer of South Korea's settlement-type immigration policy is the ethnic Korean policy that accelerated with the enactment of the Overseas Koreans Act in 1999. It is considered a failed policy in two respects. First, it supplied ethnic Korean labor mainly as non-professional workers to production sites. Since the government did not systematically invest in human resources from the start and they were forced into 'shadow labor,' many have become vulnerable groups as they age. Second, in construction, over-reliance on ethnic Korean labor has caused chronic labor shortages. Recently, these problems have expanded to care sectors such as housekeeping and nursing.

Q: How about attracting international students who like Korean culture such as K-pop?

B: There is a high possibility of mismatch in the labor market. University graduates tend to be somewhat specialized, but most international students coming to Korea are of lower quality compared to those going to the US or Japan, which have higher GDPs than Korea. Moreover, most intend to return home after obtaining a Korean university degree to seek employment. The rest do not meet the standards required by companies.

A: Immigration policy and global talent attraction are different concepts. From the perspective of such talent, Korea is not actually an attractive country for permanent settlement.

C: Many international students are in humanities fields and most plan to return home after graduation. Due to language and cultural barriers, employment at large companies is practically difficult, so they have to turn to small and medium enterprises. In that case, it is more advantageous to live in their home country with a foreign university degree.

Q: Is establishing a dedicated immigration agency or department necessary?

A: Establishing a dedicated department is a necessary but not sufficient condition. Multi-ministerial cooperation is essential. It is necessary to accurately forecast labor demand, bring in the right workers at the right time, train them, and distribute them?a big picture must be drawn.

B: Immigration policies currently scattered across the Ministry of Justice, Ministry of Trade, Industry and Energy, Low Birthrate and Aging Society Committee, and the Prime Minister's Office should be unified and integrated under an independent dedicated department.

C: According to the Government Organization Act, agency-level organizations cannot propose bills. It is questionable whether agency-level organizations can handle social integration and interregional cooperation issues related to immigration, excluding immigration administration. Therefore, a ministry-level central administrative agency, such as a 'Low Birthrate Response Planning Department' (tentative name), needs to be launched.

Q: Are there countries we can benchmark?

A·B·C: The point to note is that no country faces low birthrate and aging issues at the same level as South Korea. Therefore, it is difficult to identify a country to benchmark, and an independent system must be built. However, some foreign policies can be referenced and adopted as needed.

B: In this context, it is necessary to refer to Japan's Specified Skilled Worker system, which changed the paradigm of foreign worker inflow policy. The Japanese government sets the number of accepted workers every five years in specific sectors suffering labor shortages. Japan actively accepted foreign workers with expertise in certain industries. In contrast, South Korea implemented the Employment Permit System, which assigns workers mainly to 3D jobs (difficult, dangerous, dirty) that Koreans avoid regardless of expertise, resulting in the proliferation of illegal residents.