Debate grows over charging foreign day laborers health insurance premiums

Debate on whether to charge health insurance to day laborers of foreign nationality was sparked on Monday as local media reported that the government is reviewing such a plan as a new funding source for the national health insurance system amid Korea's low birth rate.

The government is developing strategies to bolster its health insurance funding as Korea rapidly becomes a super-aged society, according to local reports. According to reports, this plan concerns expanding the income categories subject to insurance premiums and incorporating other forms of income, namely that of one of Korea's most vulnerable populations: foreign national day laborers.

Authorities will establish procedures to enable individuals voluntarily to report temporary income and prepay their insurance premiums, according to Yonhap News Agency, quoting anonymous officials from the Health Ministry. This initiative is expected to cover income from day labor, a category previously exempt from health insurance contributions despite technically being part of the “taxable income” defined by existing regulations, it said.

"Day laborers" are defined as workers employed for less than three months without a particular employer or, in the case of construction workers, for less than one year. Their earnings typically come in daily or hourly wages, with significant variations in pay across industries depending on skill levels, hours and employers.

Day labor income is considered the earnings of workers struggling to make ends meet, even though rises in the minimum wage -- currently 9,860 won ($7.17) an hour -- have elevated day laborers' incomes somewhat over the years. According to data from the National Tax Service, the average annual income of day laborers increased from 8.65 million won in 2021 to 9.84 million won in 2023. For comparison, the average pretax annual salary in Korea is 41.23 million won as of 2023.

Until now, day labor income has generally been classified as "income of the vulnerable" and was therefore exempt from national health insurance contributions. Although the average monthly income of a day laborer is only 820,000 won -- versus the 3.44 million won earned monthly by the average employee -- authorities believe there has been sufficient growth in day laborer wages to reconsider their exempt status.

The current exemption from health insurance premiums on day labor income, particularly among foreign day laborers, has led to a gap in contributions, as they, when taken all together, earn a significant total amount of income in Korea, according to Yonhap quoting the Health Ministry.

According to the Taxation Service, over 450,000 foreign national day laborers in Korea earned a combined total income of approximately 9.9 trillion won last year. The ministry assumes that most of these day laborers were exempt from paying health insurance premiums because it is levied on those who make more than 150,000 won a day. If paid minimum wage, a day laborer working eight hours would earn only 78,880 won a day.

Policymakers view this population as a missed opportunity for revenue collection, given the strain on health insurance funds caused Korea's low birth rates.

While the government is continuing to look for sources of health insurance premium funds under its reform plans, the Health Ministry said Monday afternoon that it has not yet officially decided whether to charge day laborers health insurance premiums.

"We will continue to consider expanding the premium system after sufficient public discussion to ensure the stable operation of insurance finances in the future," the ministry said.