Foreign Workers Cost More Than Korean Staff

An auto parts manufacturer in Gunsan, North Jeolla Province, employs 35 workers, 10 of whom are foreigners.

The company hired foreign workers primarily because they were cheap, but their costs have begun exceeding those of domestic workers.

According to the labor cost document the company submitted to the Korea Federation of Small and Medium Business yesterday, the firm spent slightly more than two million won per foreign worker a month, higher than 1.69 million won per Korean worker.

A company source said, “Though foreign employees have become more costly than Korean employees, we have no other option than to keep them because it’s hard to hire new workers.”

The base salary the company pays a foreign worker is 852,020 won, less than the 950,000 won earned by a Korean employee.

The base salary for a foreigner was calculated based on the minimum wage of 3,770 won an hour and a 44-hour workweek. Korean workers also receive about 10,000 to 20,000 won more than non-Koreans in social insurance and severance.

Foreign staff, however, cost more because they receive dormitory allowances of 300,000 won, utility subsidies of 100,000 won and meals worth 250,000 won a month.

For Korean workers, the company is not required to provide accommodation or meals other than lunch. Foreign employees, however, get three meals a day, even on holidays.

Another manufacturer in Wonju, Gangwon Province, is in the same situation. Its Korean employees cost 40,000 to 50,000 won more than non-Korean employees in monthly basic salary and fixed allowance.

Foreign staff, however, get 250,000 won more for meals in addition to accommodation (100,000 won) and utilities (45,000 won) that are not required for Korean workers. As a result, a foreign worker costs 1.75 million won a month, higher than a Korean worker (1.43 million won).

A metal product maker in Daegu pays Korean and foreign staff the same other than social insurance, in which Koreans are paid 6,000 won more than non-Koreans. But the final labor cost for a foreigner is 1.97 million won and that for a Korean 1.82 million won because non-Koreans get 150,000 won more for accommodation.

Considering that a foreign worker’s productivity is only 70 to 80 percent of a Korean counterpart due to communication problems, a non-Korean’s labor cost is much higher.

The phenomenon is primarily caused by the consistent hikes in minimum wage for foreign workers, which eliminated the pay gap between Korean and non-Korean workers. The Labor Standard Act and the minimum wage system apply to foreigners and Koreans. The hourly minimum wage has more than doubled from 1,865 won in 2000 to 3,770 won last year.

Small business owners and the Korea Federation of Small and Medium Business are demanding the calculation of accommodation cost that companies provide in the minimum wage. They say the European Court of Justice also ruled last month that each member country can set different minimum wages for domestic and foreign workers.

This argument was also raised when Prime Minister Han Seung-soo recently met with small business owners.

Labor Ministry official Kim Yeon-shik said, “If accommodation costs are included in the minimum wage, Korean workers who get accommodation will also suffer considerable deterioration in working conditions.”

On a different minimum wage should be set for foreign workers, he said, “It’s hard to discriminate against them just because they are not Koreans. That also goes against the principles of the International Labor Organization.”

Lee Kyu-yong, a researcher at the Korea Labor Institute, said, “Korea’s minimum wage is higher than Taiwan’s. Some say that the minimum wage should be flexibly applied depending on age and nationality. Personally, I think a compromise is possible in which corporations charge part of the accommodation costs from foreign workers.”

tesomiom@donga.com