Mitigating Labor Shortage and Cost Burden in Care Service Sector [BOK Issue Note 2024-6]

Macro Economy
Labor Shortage Care Service Sector Foreign Labor Employment Permit System Minimum Wage
Research Department(02-759-5393)

1. The labor shortage in the care service sector is pushing costs beyond levels that common families can afford, leading to serious socioeconomic problems.

    ① The average monthly cost of hiring a private caregiver is 3.7 million won, exceeding the median income of households with members aged 65 and older by nearly 1.7times. In-home child care costs, averaging 2.64 million won, takes up more than 50% of the median income of households with members in their thirties. This heavy burden has resulted in adverse consequences, including polarization in institutional care service, constraints on female labor participation, and low fertility rates.

    ② The estimated shortfall of 190,000 care workers in 2022 could exponentially increase to between 610,000 to 1.55 million by 2042. The lack of caregivers may force elderly caregiving responsibilities onto family members, resulting in a macroeconomic loss equivalent to 2.1% to 3.6% of GDP by 2042.

2. To address this deficiency in care service and alleviate the cost burden, proactive consideration should be given to leveraging foreign labor. This paper examines two potential options.

    ① Families in need of care could directly hire a foreign care worker based on bilateral contracts. Since the direct contract between natural persons is not subject to the legal minimum wage requirements, the cost to service consumers is likely to be lower.

    ② Care services could be added to the list of industries covered by Employment Permit System for foreign nationals, with a relatively low minimum wage set for the care service sector. However, this approach necessitates social consensus regrding the application of different minimum wages by industry.

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