Even After Offering 450,000 Won, 'Foreign Labor' Was Hired... Now Encroaching on Domestic Jobs [Construction Crisis Report]

Aiding Illegal Employment
Construction Market Slows, Project Volume Drops Sharply
Preference for Foreign Workers Continues Over Domestic Workers
Employers Avoid Social Insurance and Overtime Pay
Hiring Undocumented Workers to Maximize Profits

"Foreign workers pose a tangible threat to domestic construction workers who are in need of jobs."

On August 1, workers at construction sites voiced their concerns, saying that while the distorted structure of the construction industry is problematic, they are even more afraid of changes in the labor market. The number of foreign workers surged from 2020 to early 2022, during a boom in the construction sector. As the domestic construction workforce declined due to an aging population and the avoidance of so-called 3D (dirty, dangerous, difficult) jobs, construction companies aggressively expanded their businesses, fueled by abundant liquidity during the low-interest-rate period of the COVID-19 pandemic. The number of construction sites increased rapidly, but the supply of labor could not keep up. Even when offering 450,000 won per day, there was still a shortage of workers, leading to the unhesitant employment of undocumented foreign workers.

However, since the construction market slowed down at the end of 2022, the expansion of foreign worker employment has become a trap that tightens the situation for domestic workers. The volume of construction projects dropped sharply, but the preference for foreign labor did not change. In fact, there has even been a trend of preferring foreign workers over domestic ones.

From the employer's perspective, hiring undocumented foreign workers makes it easier to maximize profits. Employing undocumented foreigners allows employers to avoid various administrative and labor procedures, such as enrolling workers in the four major social insurances and paying overtime wages. By exploiting their lack of legal residency status, employers can make undocumented foreign workers work 13 to 14 hours a day, and these workers cannot even protest.

In particular, institutional loopholes are further entrenching this trend. The Ministry of Employment and Labor operates the 'Employment Permit System,' which it describes as "a system that allows small and medium-sized enterprises that cannot find domestic workers to legally hire unskilled foreign workers after receiving an employment permit from the government." However, in practice, it is common for employers to go through the motions of recruiting domestic workers before hiring foreigners, or to prioritize foreign workers even when domestic job seekers are available.

The perception has spread that it is more 'rational' to reduce costs by employing undocumented workers rather than hiring foreigners legally and being subject to government oversight. Last year, the quota for unskilled foreign worker visas (E-9) was 6,000, but only 1,476 (24%) actually entered the country. Even when including those with the Visit and Employment (H-2) visa, the total was only 2,486. This means that, despite the existence of the system, the field is largely ignoring it.

The Employment Permit System visa is issued for the number of workers requested by the employer. However, in 2023, the Ministry of Employment and Labor stated that "it has no supervisory authority over sites that do not apply for the system," effectively rendering the system powerless. The moment a site joins the system, it comes under government scrutiny, which has led construction companies to intentionally avoid it.

Gong Byeongyeol, deputy head of the Daegu-Gyeongbuk Construction Branch of the Korean Construction Workers' Union (KCTU), said, "If foreign workers are being used because there is a labor shortage, that is understandable. The problem is that, in the current situation where job opportunities have plummeted, illegal employment is replacing domestic jobs, and the government is condoning this."

He added, "The wages earned by construction workers should be spent locally and help drive the regional economy, but now most of it is being remitted abroad. The government claims to be revitalizing the construction industry, but I want to ask: for whom is this recovery intended?" He continued, "Surely, the goal is not to take responsibility for the livelihoods of foreign workers instead of our own construction workers."

Order of Articles in the 'Construction Crisis Report' Series

<1-1> Construction Sites at a Standstill, Day Laborers' Lives Collapsing
<1-2> "Three or Four More Bankruptcies"... Mid-Sized Construction Firms on the Chopping Block
<2-1> What Seemed Like a 'Lifeline' Became a 'Trap': The PF Crisis
<2-2> Easing Multi-Home Regulations, Key to Reviving Regional Real Estate
<3-1> "Every Day Is Nerve-Wracking": Subcontractors and Downstream Industries Shaken
<3-2> Even Major Firms Cannot Avoid Wage Arrears
<3-3> LH and Local Governments Also in Wage Arrears
<3-4> Even the President Stepped In... Urgent Need for Vertical Structure Reform
<3-5> The Company That Survived Without Illegal Subcontracting
<3-6> United at the Collapsed Site
<4-1> Foreign Construction Labor Encroaching on Domestic Jobs
<4-2> Not 'Regulating Foreigners' but 'Protecting Domestic Workers'
<4-3> The Real Cause of Profitability Deterioration: Frequent Rework