How the reduction of Temporary Foreign Workers led to a rise in vacancy rates in South Korea

This paper investigates the causal impact of reducing low-skilled temporary foreign workers (TFWs) on job vacancies in South Korean manufacturing sectors, using the COVID-19 quarantine policy as a natural experiment. The research applies Difference-in-Differences analysis with a shift-share instrument based on the quarantine ‘shock’ and the ‘share’ of TFWs before the pandemic. The findings indicate that sectors heavily dependent on TFWs, especially for full-time positions, experienced higher vacancies for two years following the pandemic. Native workers were unable to fill the gap left by TFWs. Local Projection methods also confirm these findings