Influx of foreigners to the Korean labor market raises the proportion of
unskilled labor as the majority of them are low-educated. An anticipated
consequence is a slowdown of wage and employment growth among the
competing unskilled natives and consequential widening of skill wage gaps. To
measure the impact, this paper takes an aggregate factor proportions approach
instead of impact evaluation method and estimates how a skills composition
change affects worker status. Workers’ skills levels are defined according to
their education and experience. The need to add experience among the skills
determinants is motivated by the diverging wage paths across different age
groups within the same education groups. A perfect substitutability assumption
between foreigners and natives within a skills group leads to an estimation
result that shows inflow of foreigners has lowered wage growth of young
unskilled men by as much as 20% in the first decade of the 2000s. Under a
more realistic assumption of imperfect substitution, the suppression effect is
between 10 and 15%. The implication of this study for a mid- to long-term
foreign labor policy is that a conservative policy stance is desirable as far as
the unskilled labor inflow is concerned.