CONTRIBUTION Quality foreign workforce now indispensable for growth momentum

Richard Lee, senior partner at McKinsey Korea / Courtesy of McKinsey Korea

Throughout the COVID-19 pandemic, two commonly deployed vaccines proved out to be effective against the virus – Moderna and Pfizer/BioNTech. What these two different substances had in common, besides medical efficacy, was that both had been developed by immigrants.

Founding Moderna was Noubar Afeyan from Armenia, who started the company in the United States in 2010. BioNTech, which collaborated with Pfizer in the vaccine's development, was founded by the husband-and-wife team of Ugur Sahin and Özlem Türeci, both Turkish immigrants from Germany.

The influx of immigrants is often seen as triggering social, political and economic tension but in fact, contributes to the corresponding country’s human resource innovation.

This is all the more significant for Korea, given its relatively limited population and stalled growth momentum, as well as its chronic market undervaluation – dubbed the “Korea discount,” or K-discount.

The lack of diversity in governance – not only in terms of nationality but also in terms of gender, age and social backgrounds – has always been deemed a chronic roadblock for Korea’s industrial circles.

Korea’s inflow rate of foreign labor with higher education qualifications stood at 2.8 percent as of 2022, ranking 33rd among OECD member states – outrunning only Chile, Columbia, Mexico and Turkey.

Also, its total number of skilled professionals remained more or less unchanged during the 10 years from 2012 to 2022, marking a contrast with peer economies including neighboring Japan.

During the same period, Japan saw its professional foreign workforce almost quadruple on the back of overseas recruitment policies such as the Industrial Revitalization Strategy.

While continuing efforts to attract foreign workers in areas such as hospitality, food services and small-and-medium enterprises, Korea’s policymakers should extend such efforts to leading advanced industries such as software, semiconductors and bio.

Adding further to the lack of a quality workforce and diversity here is the very low proportion of non-Koreans in corporate decision-making bodies. The number of foreign executives in the country’s top 100 companies stood at 1.4 percent as of 2018, with the figure dropping further to below 1 percent when excluding the top player Samsung Electronics.

Japan, on the other hand, recently vowed to double the count of foreign professionals working under a business manager visa, aiming for an increase from 95,000 in 2019 to around 200,000 in 2030. Many of the notable businesses such as Takeda Pharmaceuticals and Trend Micro are already led by non-Japanese chief executive officers.

Once the foreign talent pool is diversified beyond Korean nationals, Korea should then move on to cultivating a richer startup ecosystem.

The D-8-4 startup visa program has been active for over 10 years but the yearly volume of issuances has remained below 50, with only 111 individuals actively qualifying as of 2022 – a figure translating into some 0.3 percent of all startups in Korea.

Meanwhile, Japan recently introduced a digital nomad visa starting this year, allowing remote workers to work anywhere in Japan for up to six months. This new system quickly gained popularity among young professionals around the globe, especially as the yen's devaluation allowed for low-cost living for expats. In step with such trends, Mitsubishi Real Estate announced a plan to add 10,000 rental homes by 2030 for foreign nationals.

In an era of uncertainties, one of the most effective ways to break free from conventional practices and attain innovation is to increase diversity. Standing at the current crossroads for growth, Korea should place priority on expanding its talent base and embrace a wider audience.

Richard Lee is a senior partner at the McKinsey Korea office. His area of expertise includes high technology, media and telecoms and private equity practices in Seoul.