How the Reduction of Temporary Foreign Workers Led to a Rise in Vacancy Rates in South Korea

Deokjae Jeong

Journal of Human Capital, 2026, vol. 20, issue 3, 422 - 461

Abstract: This study uses the COVID-19 quarantine policy as a natural experiment to investigate the causal relationship between the reduction of low-skilled temporary foreign workers (TFWs) and job vacancies in South Korea’s manufacturing sectors. Employing a difference-in-differences methodology, the research reveals that sectors with high dependence on TFWs, particularly to fill permanent positions, experienced significantly elevated vacancy rates for a 2-year period after the onset of the pandemic. The inability of native workers to fill these positions highlights the critical role of foreign labor in mitigating labor shortages. Notably, vacancy rates began to decline only after the government relaxed quarantine restrictions, facilitating the reentry of TFWs into the country. These findings are corroborated by local projection methods.

Date: 2026
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