Korea’s declining potential growth due to demographic change has elevated immigration policy as a central economic strategy, yet effective design is hindered by limited evidence on labor-market impacts and growing reliance on non-employment residence statuses that still permit work.

Traditional employment-visa-based forecasting no longer captures the true scale or composition of foreign labor.

This study addresses this gap by providing rigorous evidence on how foreign worker inflows affect labor-market outcomes and by identifying key determinants of migrants’ decisions to move to Korea.

Using a causal framework with shift-share instruments for 229 municipalities (2016-2023), the study shows that an increase in employment-visa foreign inflows raises natives’ days worked slightly but substantially reduces foreign workers’ days worked and incomes.

Income effects on natives are, on average, statistically insignificant, while foreign workers’ incomes decline markedly, indicating strong substitution and competition among foreign workers and more pronounced adverse effects for foreigners than for natives.

The effects vary by period and visa type.

In the post-COVID-19 period, inflows under employment visas reduced native incomes, and the adverse income effects become more pronounced when non-employment visa holders (e.g., overseas Koreans, international students, and permanent residents) are included.

These findings underscore that mismeasurement of labor inflows ― particularly the exclusion of non-employment statuses ― can bias impact estimates and lead to misguided policy conclusions.

Beyond labor outcomes, the analysis documents migration determinants ― income, finance, and migration costs ― showing a consistent native income premium, limited financial inclusion for foreigners reliant on high-interest loans, and high migration costs relative to expected income, especially under short-term stay regimes.

Taken together, the findings indicate that immigration policy in Korea should move away from a narrow, employment-visa-centered approach and toward an integrated framework that explicitly accounts for all labor-supplying residence statuses and their heterogeneous effects over time and space.

These patterns underscore the necessity of evidence-based visa quota setting, careful monitoring of regional and sectoral impacts, and policy instruments that prevent unintended harm to vulnerable groups.

By grounding immigration policy in precise measurement and causal analysis rather than aggregate labor-shortage narratives, Korea can better align foreign labor utilization with sustainable growth and labor-market stability.

Abstract (ENG)
Preface
Summary (KOR)

Chapter 1 Introduction

Chapter 2 Current Status and Major Characteristics of Foreign Workers
　Section 1 Current Status of Migrant Foreigners
　Section 2 Foreign Workers with Employment Eligibility

Chapter 3 The Impact of the Inflow of Foreigners into Regions on Natives and Foreigners
　Section 1 Comparison of Foreign Inflow Trends and the Human Resource Structure of Natives and Foreigners
　Section 2 Literature Review
　Section 3 Analytical Data and Methodology
　Section 4 The Impact of Foreign Inflow and Policy Implications

Chapter 4 Discussion on the Determinants of Migration for Foreign Workers
　Section 1 Income
　Section 2 Financial Activities
　Section 3 Migration Costs

Chapter 5 Conclusion

References
Appendix
ABSTRACT