Exploring the Effects of Skills Test on the Labor Market Outcomes of Migrant Workers in Korea

Abstract

Skills test has been administered since 2012 as a part of the employment permit system, which governs the selection process of foreign workers in Korea. Despite the significance of having a well-functioning guest worker program in eliciting desirable foreign migrant workers, there have been scant attempts to objectively measure the effectiveness of the skills test in terms of enhancing the quality of the short-term guest workers in Korea. In this paper, we empirically evaluate the impacts of the implementation of the skills test on the labor market performance of foreign-born workers in Korea. In order to address the econometric issues arising from non-random assignments related to the decision to take the test, we apply the propensity score matching method to administrative data collected by Korea Employment Information Service (KEIS). The results suggest that foreign workers participating in skills test tend to experience a longer duration of employment, being more likely to fulfill a contract period, with small negative effects on wages.