It has been revealed that the hourly wages of domestic helpers in South Korea are more than four times higher than in neighboring countries such as Hong Kong and Taiwan. In an effort to alleviate the burden of caregiving services, which is considered one of the causes of low birth rates, the Bank of Korea (BOK) has proposed an alternative solution of introducing foreign domestic helpers and implementing differential minimum wages specifically for caregiving services.
According to the “BOK Issue Note: Measures to Alleviate the Shortage and Cost Burden of Care Services Personnel” released by the BOK on March 5, the hourly wage of domestic helpers in South Korea was reported to be 11,433 won (US$8.61) in 2022, which is six times higher than that of foreign domestic helpers in Singapore at 1,721 won. It is also more than four times higher than the hourly wages of foreign domestic helpers in Hong Kong at 2,797 won and Taiwan at 2,472 won.
Chae Min-seok, the deputy head of the employment analysis team at the BOK, stated, “Countries such as the United States, Japan, Germany, and Australia also differentiate minimum wages by industry and region. Given the urgent need to address the shortage of personnel and the cost burden in the care services sector, differential minimum wages are inevitable.”
In response to the BOK’s proposal to apply differential minimum wages by industry, the labor sector has expressed opposition. The government plans to implement a pilot project for foreign domestic helpers sometime this year.
According to the report from the BOK, the average monthly cost of caregivers in nursing hospitals last year was estimated to be 3.7 million won. This is 1.7 times higher than the median income of households aged 65 and older, which is 2.24 million won, and even surpasses 60 percent compared to the median income of households with children aged 40 to 50, which is 5.88 million won. The cost of childcare helpers is also significant at 2.64 million won, accounting for 51.9 percent of the median income of households in their 30s, which is 5.09 million won. The burden of care service costs is weighing heavily on households in South Korea.
The BOK diagnosed the increasing burden of care service costs, stating, “The labor supply in care-related jobs has decreased due to the effects of low birth rates and an aging population, while demand has significantly increased.”
The rise in care service costs has also been steep. Last year, caregiver and domestic helper expenses increased by 50 percent and 37 percent, respectively, compared to 2016. This significantly outpaces the nominal wage growth rate of 28 percent over the same period. With the rapid aging phenomenon leading to increased demand for care, the shortage of labor supply in care service jobs has worsened, contributing to the rise in costs.
The BOK suggested, through its report, the necessity of actively utilizing foreign workers to alleviate the shortage of care service personnel and the increase in costs. It proposed expanding the current employment permit system to include the care service sector, thereby enabling the acceptance of foreign workers. Additionally, it recommended implementing measures to lower the minimum wage specifically for the care service industry.
The BOK also advised that individual households can reduce costs by directly employing foreign workers. If individual households directly hire foreign workers through private contracts, they are not subject to the application of minimum wage regulations under domestic and international laws. Countries such as Singapore, Hong Kong, and Taiwan employ domestic helpers by paying only around 15 to 24 percent of the costs incurred in South Korea through this method.
Some experts have evaluated the BOK’s proposal as a practical solution to address the “care crisis” that has impacted South Korean society. Professor Jeon Young-soo from Hanyang University’s Department of Global Social Economy stated, “Expanding the employment of foreign caregivers and introducing differential wages could be the most effective short-term measures.”