The Bank of Korea's Report on 'Caregiving and Childcare Workforce Shortage' After One Year... How Much Has Changed? [Economic Policy Zoom-In]

The Bank of Korea released a report titled "Measures to Alleviate Labor Shortages and Cost Burdens in Care Services" on March 5 last year. The report discussed the labor shortages in caregiving and childcare services in South Korea, specifically the high costs and insufficient labor supply, and actively considered utilizing foreign workers. It also suggested the need to reduce cost burdens by applying differentiated minimum wages in the care service sector.

Although the report sparked controversy and opposition from labor groups at the time, it was also positively evaluated for directly addressing an essential issue in our society. About a year later, this article reviews changes such as the introduction of Filipino domestic workers and the government's plans to train and recruit foreign care workers, and examines why some proposals from the report, like differentiated minimum wages, are difficult to implement in practice.

On the 24th, an elderly person is moving to the rooftop garden with a caregiver at the Eunpyeong Senior Care Center in Eunpyeong-gu, Seoul. The Eunpyeong Senior Care Center is a facility dedicated to elderly care, built in the Susaek 13 District housing redevelopment site, and was the first in the nation to be donated through a public contribution method in a private development project by the Seoul Metropolitan Government. It is a public elderly care facility spanning from basement level 1 to the 6th floor above ground and opened in May. Photo by Kang Jin-hyung

According to the Bank of Korea report, the average monthly caregiving cost in South Korea (3.7 million KRW) is 1.7 times the median income of elderly households (65 years and older), and childcare helper costs (2.64 million KRW) exceed 50% of the median income of households in their 30s. Such high cost burdens lead to involuntary nursing home admissions, restrictions on women's economic activities, and low birth rates.

Furthermore, the shortage of labor supply in care service jobs is expected to expand significantly, from 190,000 in 2022 to between 380,000 and 710,000 in 2032, and between 610,000 and 1,550,000 in 2042. The increase in family caregiving due to this shortage is estimated to cause economic losses equivalent to 2.1% to 3.6% of the gross domestic product (GDP) by 2042.

The Bank of Korea report stated that introducing foreign workers into care service jobs is inevitable and proposed two measures. The first is a method where individual households directly hire foreign workers through private contracts. Since this is based on private contracts, minimum wage laws would not apply, potentially reducing the cost burden on consumers. The second is to include care services in the employment permit system (E-9) for foreign workers and set relatively lower minimum wages for this sector.

The report brought attention to the labor shortage in care services and the use of foreign labor, which appears to have provided momentum for various government initiatives.

Six months before the Bank of Korea report was published, in September 2023, the government decided through the 38th Foreign Workforce Policy Committee to implement a "pilot project for foreign domestic helpers" under the employment permit system (E-9). The Ministry of Employment and Labor initially planned to start the project in December 2023, but due to delayed negotiations between South Korea and the Philippines, 100 Filipino domestic helpers entered the country in August last year, underwent four weeks of job training, and began providing care services from September. Including the seven-month pilot project, they are scheduled to work for a total of 36 months, extended by 29 months. This pilot project realizes the second measure proposed in the Bank of Korea report.

However, differentiated minimum wages are difficult to implement due to various issues. The hourly rate for Filipino domestic helpers is 13,940 KRW, which exceeds last year's minimum wage of 9,860 KRW. This year's rate, reflecting severance pay, paid holidays, operating costs, and profit, is set at 16,800 KRW per hour, 67% higher than this year's minimum wage of 10,030 KRW.

Filipino workers participating in the pilot project for foreign housekeeping managers are arriving through Incheon International Airport on the 6th. Photo by Airport Photographers Group

Additionally, in July last year, the Ministry of Justice established a new visa category (E-7-2) for care workers with an annual quota of 400, allowing foreign students who graduated from domestic universities to obtain care worker qualifications and employment. The Presidential Committee on Ageing Society and Population Policy selected six core tasks in December 2022, announcing plans to include caregivers in the E-7 (professional workforce) visa issuance and to relax the visa issuance experience requirement from five years to three years. However, this was only implemented last year, one year and seven months later.

While the employment permit system (E-9) brings workers directly from abroad, the care worker visa utilizes foreign workers already residing in South Korea. Accordingly, in January this year, the E-7-2 visa was issued for the first time to a foreign student who graduated from a domestic university and obtained a care worker certificate. This individual began studying in South Korea in 2018, stayed on a job-seeking (D-10) visa after graduation, obtained the care worker certificate in 2024, and was employed at a long-term care facility for the elderly.

The Ministry of Justice is also conducting a pilot project this year for "foreign domestic workers" who are exempt from minimum wage laws. This targets foreign residents such as students (D2, D10), family members of marriage immigrants (F-1-5), and spouses of foreign workers (F-3). Domestic workers include housekeepers, cleaners, and drivers working in private households, who contract directly with individual families and are not subject to labor laws like minimum wage. This pilot project realizes the first measure proposed in the Bank of Korea report.

Furthermore, at the 30th Foreign Policy Committee held on March 5 this year, the government announced plans for "training and introduction of foreign care workers."

First, starting next year, a pilot program will be operated to train care workers who can be immediately deployed in the field through a "specialized training course for foreign care workers." Selected trainees will be chosen based on overseas national qualifications (such as social welfare and nursing certifications), majors (graduates or students in social welfare, nursing, or related fields), and Korean language proficiency. The program will provide customized professional training for foreign care workers, followed by practical training, qualification acquisition, and employment, establishing a systematic process.

Additionally, a "university degree program" for training foreign care workers will be established. In cooperation with metropolitan local governments, outstanding regional universities will be designated as "universities for training foreign care workers," managing the entire process from recruiting foreign students to operating degree programs, qualification acquisition, and employment. The selection of specialized training students and designation of training universities are scheduled for the second half of this year.