Do More Migrants Lead to a Richer Nation?

by 사소한 질문들

We are literally living in the era of globalization. Except for very few exceptions or nations in conflict, people can travel, live, or settle in a foreign country. Globalization has lowered the barriers to the transfer of goods, capital, and human resources. World news is shared in real-time, and people can easily enjoy the food and culture of other countries, without the need to be there physically.

Korea : The High-Income, Multi-Cultural Society

It’s no longer uncommon to meet and interact with a foreigner in the streets of Korea and in everyday life. According to statistics of the Ministry of Justice, 2.17 million foreigners are living in Korea as of September 2022, which amounts to 4.2% of the entire population (51.63 million). We’re rapidly transitioning into a multicultural society. They come from vastly different nations and for vastly different reasons.

Let’s take a look at the top 15 countries these people come from: China, Vietnam, Thailand, the U.S., Uzbekistan, Russia, the Philippines, Cambodia, Nepal, Mongolia, Indonesia, Kazakhstan, Japan, Myanmar, and Canada. The largest portion come as overseas Koreans (mostly from China), and for work purposes (foreign workers), followed by studying and marriage immigration. The number of children and adolescents from migrant backgrounds* is estimated to exceed 500,000. Globalization is already a fundamental part of our daily lives; which is something we could’ve never imagined before.

*Children and adolescents from migrant backgrounds: This refers to children and adolescents from age 9 to 24 with multicultural backgrounds, including those who crossed borders to come to Korea themselves, those with at least one parent with a different nationality, and those with at least one parent who is a North Korean defector.

Despite the geopolitical uncertainties in Korea, represented by separation and military tension, many foreigners come to Korea, and many migrant workers dream of working in Korea and living a better life. Their biggest motivation is Korea’s economic power. In just half a century, Korea became a member of the OECD and G20, and one of the top 10 economies in the world, thanks to its exponential economic growth. The nation is achieving unprecedented success. As of 2021, Korea’s GNI reached $35,168. Excluding small-sized oil producing countries and city states, Korea has ranked 11th in the world in terms of income among countries with more than 10 million people.

However, there are quite a few problems and challenges faced by the Korean economy, and the society. Stagnant growth rate, widening economic/social inequality, low fertility rate and an aging society, unemployment and employment instability are common issues experienced by advanced economies. In particular, Korea is experiencing severely low fertility rates and an aging society. According to the most recent demographic statistics of Statistics Korea, the TFR (Total Fertility Rate: the average number of children a woman would give birth to during her lifetime) reached 0.79 in the third quarter of 2022 - a record low. Natural decrease of population(more deaths than births) has continued for 35 months in a row.

The ‘2021 Population and Housing Census’ shows that the total population of Korea has declined by 0.2% to 51.74 million, compared to last year. Korea is experiencing its first population decline in 72 years since the Korean government was first established in 1949, and population census began. If this trend continues, the population of Korea is expected to drop to 37 million, which was the nation's population in 1979.

What’s more serious than population decline is the population structure. Korea is rapidly becoming a super-aged society. In small cities and rural areas, schools are being merged or shut down due to a decrease in the number of students. The concern of ‘local extinction’ is now becoming a reality. A shrinking youth population and an aging society result in the lack of workforce. This means the economically active population is declining, with more burden as a caregiver. This is a major crisis in sustainable development.

Based on the ratio of people over 65, the UN categorizes nations into aging society (7% and higher), aged society (14-20%), and super-aged society (20% and higher). According to the ‘2022 Elderly Population Statistics’ announced by Statistics Korea in September, 2022, Korea’s elderly population was 9,018,000, which takes up 17.5% of the entire population (51.62 million). The trend is accelerating, meaning that Korea will become a super-aged society by 2025 with 20.6%, and 40% in 2050. Therefore, the dependency ratio, which refers to the number of people (youth + aged population) that the working age population has to support, will double from 38.7 to 76 in 2040, and exceed 100 in 2060. Each person will be responsible for one dependent.

Importing Workforce: No Longer Optional

As mentioned earlier, 2.17 million foreigners are living in Korea, as of September 2022. Among them, 433,000 qualify as 'foreign workers', and approximately 170,000 are international marriage migrants. Over 402,700 people are illegally staying in the country without the required documents. About a million migrants are an integral part of Korean economy, providing essesntial labor in factories, farms, and households. They have been a key part of small and medium enterprises(SMEs), construction sites, and rural areas for a long time. Without them, Koreans would not be able to enjoy the fresh produce on their tables. Without them, the majority of metal factories will have to stop their operations.

Not much research has been conducted in Korea regarding measuring the economic effect of migrant workers. However, research by related experts shows that their impact is far greater than imagined.

According to the <Economic Impact of Migrants in Korea>, a policy report published by the Migration Research & Training Centre (MRTC) of the International Organization for Migration (IOM) in December 2016, the economic effect created by the economic activities of 990,000 foreign workers reached 74 trillion won. This number is the production effect (54.6 trillion won) and consumption effect (19.5 trillion won) combined. The MRTC’s analysis is that “foreign workers are both producers and consumers to the host country, which makes the macroeconomic effect of foreign worker inflow a positive number.”

At the time of research, the average wage of foreign workers did not differ significantly from the minimum wage, which was 1.9 million won per month - the total wage being 22.6 trillion won. Their total consumption in Korea was 9.3 trillion won, and the remaining 13.5 trillion won was sent to their home country. This trend is not likely to change in the future.

Estimates are expected to rise, considering the increase in the number of employed people and wages, to 162 trillion won in 2026. This is double in just 10 years. The reasons for the increased number of migrants are “working age population and total population decline due to low fertility rates, higher caregiving costs due to aging, mismatch between labor supply and demand, lack of industrial workforce.”

The Korea Economic Research Institute (KERI) suggested in its report, <Necessity and Economic Impact of Increased Migration>, that an "increase in labor supply is essential for higher potential growth rate. To reduce the increased social caregiving costs caused by low fertility rates and an aging society, the influx of migrants is becoming more important.” The report states that “migration is already a global phenomenon” and quoted another foreign research that says “even if foreign workers replace domestic workers, it does not have a negative effect such as causing a competition in the labor market  with domestic workers and reducing the domestic employment rate.”

Migration as a Facilitator of Growth and Productivity

The issue of lack of workforce due to low fertility rates and an aging society can be seen in other advanced economies as well. The IMF stated in its 2020 <World Economic Outlook> that “migration to advanced economies can accelerate growth,” and “migration generally improves the economic growth and productivity of the host country.” To be specific, “the inflow of migrants to advanced countries increase both production and productivity in the short and mid-term, and a 1% increase of migrant workers lead to a 1% increase in GDP up to the 5th year.” Analysis shows that this was due to the complementary effect in that migrant workers increase the productivity of the host country through various skills. This also means that skilled workers have a greater contribution than unskilled workers.

The Joint Standing Committee on Migration of the Australian government stated in its 2015 <The Economic Impact of Migration> that “It [Migration] has a profound positive impact not just on population growth, but also on labour participation and employment, on wages and incomes, on our national skills base and on net productivity.” The assessment was that “migrants may contribute more to the government in taxes than they draw in government services.”

The money remitted from their host country to their home country is a core source of capital that flows into underdeveloped and developing countries, along with ODA and FDI. During the 60s and 70s, Korea experienced a mass export of labor, sending nurses and mine workers to Germany and construction workers to Saudi Arabia and other middle eastern countries. The foreign money earned would be the valuable seed money for national development.

In November 2022, the World Bank predicted in the <Migration and Development Brief> that the remittance amount flowing into mid-to-low income countries around the world will reach 626 billion dollars, a 5% increase from the year before. This is a record high. In particular, India has reached an all-time-high in foreign currency earned, exceeding 100 billion dollars. It’s also the first time that the yearly remittance from a foreign country coming into a single country exceeded 100 billion dollars.

The majority of international remittance comes from the income earned in rich countries by migrant workers that come from low-income countries. International remittance of migrants take up a large part (30-40%) of low income households in underdeveloped countries, and are acknowledged as a means to redistribute wealth in the international society, more effectively than ODA or FDI.* Michal Rutkowski, the Global Director for Social Protection and Jobs of the World Bank said, “Migrants help to ease tight labor markets in host countries while supporting their families through remittances. He also stated that “Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the COVID-19 pandemic,” emphasizing that “such policies have global impacts through remittances and must be continued.”

*source: World Bank

We Are All Descendants of Migrants

The majority of people around the world are descendants of migrants. A couple million years ago, the earliest ancestors of mankind living in the plains of Africa moved to Europe and the middle east and to all parts of the world. However, we don’t have to look too far back to see how movement started.

Up until the First World War in 1914, migration between countries, whether it be political or social, was not a big deal in most regions around the world. There was no real border control, and people welcomed foreigners. There was no need for an official document to cross borders. Free movement was truly possible. However, this changed completely with WWI. And there was a reason. WWI was humanity’s first total war; each country putting together all possible resources and capabilities. Governments took stronger control over their people, and an immigration control system in which people had to obtain approval in order to cross borders became a norm.

The IOM defines ‘migration’ as the act of a person or group moving across an international border or within a State. This includes all forms of population movement, regardless of the length of stay, composition, or cause, and includes refugees, disaster victims, economic migrants, and people who move for a purpose such as family reunification. Migrants are people who lived in a foreign country for at least a year, regardless of whether the migration method was common or uncommon, and voluntary or involuntary. Seasonal farm workers that travel for short periods to work in a farm are included in the scope of migrants.

This concept can be applied to all people and their family members that move to another country or region in order to seek better material and social conditions and a better life. Likewise, migration refers to a wide scope of movement, including the purpose of housing and survival. Migration is a decision to find a new shelter for survival, risking part of one's entire life, longing for better quality life.

Migration can be categorized into voluntary and involuntary migration. The biggest reason for voluntary migration is the relative income gap. It’s natural for a person in an underdeveloped or developing country to want to work in a richer country and increase their income level. This is a push factor of migration. When such push factors match the pull factors of a hosting country like lack of workforce or stronger preference for low wage workforce, labor migration occurs.

The destination isn’t necessarily the richest country. As long as it’s geographically close and richer than one’s home country, it shall suffice. This is the principle of supply and demand of labor between countries. Although a rather extreme example, 85% of the entire population of the 3 million people in Qatar are foreign workers. It’s common for sovereign states to control the inflow of migrants through policies, as it involves multiple variables such as not only economic logic, but also politics, society, culture, religion, and identity.

Leading in Income, Lagging in Migrants’ Human Rights

In 2004, Korea introduced the ‘Employment Permit System (EPS)’ for foreign workers. This system allows domestic companies to hire foreign workers with government approval when they cannot find workers in the domestic labor market. The government announces the estimated number of foreign workers needed for each industry every year. Foreigners who wish to find a job in Korea must obtain a certain score on the Test of Proficiency in Korean (TOPIK).

Those who pass the long process of TOPIK, physical examination, visa issuance, and etc., are given 3 years of stay. When the employer wishes to rehire, their stay can be extended by 1 year and 10 months, to a maximum of 4 years and 10 months. However, migrant workers who came through the EPS cannot change their place of employment without the permission of the employer, unless with special circumstances. This is to prevent the long term settlement of the migrant worker and guarantee employment stability, but this is also the biggest cause of human rights violation of employers inflicted on migrant workers.

The <2021 National Image Survey Report> published by the Korean Culture and Information Service in December 2021 shows the survey results of citizens in 23 countries, and the image of Korea received a positive score of 80.5%, which is quite a high number. The report stated that Korea received a higher positive score from foreigners than Koreans. Foreigners in Korea, including migrant workers, generally have a positive impression of Korea.

Then, how does Korean society treat foreigners? The level of prejudice and discrimination towards foreigners, based on their nationality, skin color, social status, and job, is still very high. The shortened version of foreign workers in Korean, ‘Eonoja’ is used as a derogatory and discriminatory term in online communities. There are extremely derogatory terms used to refer to foreigners based on their nationality, appearance, religion, etc. - even in basic industries like manufacturing and agriculture/livestock, fishery, that cannot be sustained without foreign workers.

Niroshan from Sri Lanka is an expert in welding with 12 years of work experience in Korea, but decided to return to his home country, unable to overcome the loneliness and hardships in his ‘second home country’ Korea, and the ‘minimum wage given to him despite his experience.’ He keeps dear in his heart the memories with the elderly in the nursing home. (Lee, I am a Migrant Dreaming of a Future, Hanibook.) If Korean society considers migrant workers as ‘low-income country people who come to make money,’ or ‘people who remit money earned in Korea to other nations,’ wouldn’t migrant workers also want to treat Korean society that way?

The migrant workers who come to Korea through the Employment Permit System (also known as a ‘slave contract’), receiving wages under the minimum wage are human, too. Most of them are high-caliber talents that received high level education from their country. Even with the economic logic alone, they are truly valuable people that we should be thankful for. Today, Korea has become a mature country that is able to embrace foreign migrants. Accepting these migrant workers, providing better labor conditions, and treating them as equal members of our society - at least during their stay in Korea - is not to benefit one side only, but the way to reach co-prosperity.

Writer 조일준

<Hankyoreh> Reporter. Author of ⟪Migrating Human, Homo Migrans⟫(2016). In February 2011, he witnessed the vibrant atmosphere of the ‘Arab Spring’ democratic movement in Cairo, Egypt. In November 2015, He covered the simultaneous terror attacks in Paris, France. Reporting on international news with a focus on the Middle East and Europe, he developed an interest in migration and refugee issues, as well as the lives of world citizens. He studied Economics at Korea University, and was a visiting researcher at ISIM, Institute for International Migration, Georgetown University, Washington, USA.

Edit 주소은 Translate 김민지 장동주 Graphic 이은호 조수희 엄선희 함영범

– This article was written on December 14, 2022. – External contributions on Tossfeed are written by external experts and writers in order to provide readers useful financial tips and information. Such contributions follow Toss' brand media guidelines and may differ from the editorial direction of Toss.

의견 남기기
사소한 질문들

세상의 중요한 발견은 일상의 사소한 질문에서 태어납니다. 작고 익숙해서 지나칠 뻔한, 그러나 귀 기울여야 할 이야기를 조명하며 금융과 삶의 접점을 넓혀갑니다. 계절마다 주제를 선정해 금융 관점에서 풀어봅니다.

필진 글 더보기

추천 콘텐츠

지금 인기있는 글