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Foreign Workers’ Labor Costs Excessive with Lower Productivity
KBIZ’s Survey
Foreign Workers’ Labor Costs Excessive with Lower Productivity
  • By Yoon Yung Sil
  • March 14, 2018, 01:00
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The total labor cost for a foreign worker was higher than that for a domestic worker.
The total labor cost for a foreign worker was higher than that for a domestic worker.

 

According to a survey of 300 small and mid-sized manufacturers that hire foreign workers on board and lodging costs for foreign workers conducted by the Korea Federation of Small and Medium Business (KBIZ) on March 13, 59 percent of respondents said, “labor costs for foreign employees compared to domestic employees are excessive.” Out of the 59, 41.3 percent of the respondents said, “excessive,” while 17.7 percent of them said, “too much excessive.”

The total labor cost for a foreign worker was higher than that for a domestic worker. The monthly average labor costs for domestic workers, including regular salary, such as basic pay, normal allowance, other allowance and extra pay, and in-kind salary, like lodging and food expenses, came to 2,426,000 won (US$2,278), which was 64,000 won (US$60) higher than 2,362,000 won (US$2,218) for foreign workers.

However, foreign workers showed lower productivity. The respondents said foreign employees had an average of 87.5 percent of productivity compared to domestic workers. It is 8.8 percent points lower than 96.3 percent of the wage costs for per foreign worker compared to domestic workers.

An official from the KBIZ said, “Businesses have no choice but to compare wage costs with productivity of workers. The total wage costs for foreign workers is lower than that of domestic workers but there is a big gap in productivity. So, they feel like they are paying more wages to foreign employees.”

In addition, high in-kind salaries, like lodging and food expenses, are another factor that businesses feel like they are paying excessive wages to foreign workers. The in-kind salaries for foreign employees amounted to 477,000 won (US$448), which was 151,000 won (US$142) higher than 326,000 won (US$306) for domestic workers. An official said, “Many businesses think that in-kind salaries, including lodging, are a duplicate payment.”

Lee Jae-won, head of the human resource provision division at the KBIZ, said, “Small and mid-size businesses that hire foreign employees have a higher burden from the rise in minimum wages. The government should include board and lodging costs in minimum wage calculation to relieve a burden of labor costs on small and mid-size firms.”