We aimed to evaluate the health effects of precarious employment based on a counterfactual framework, using the Korea Labor and Income Panel Survey data. At the 4th wave (2001), information was obtained on 1991 male and 1378 female waged workers. Precarious work was defined on the basis of workers employed on a temporary or daily basis, part-time, or in a contingent (fixed short-term) job. The outcome was self-rated health with five response categories. Confounding factors included age, marital status, education, industry and occupation of current employment, household income, residential area, and prior health status. Propensity scores for each individual to be a precarious worker were calculated from logistic models including those covariates, and based on them, precarious workers were matched to non-precarious workers. Then, we examined the effects of precarious employment on health and explored the potential intermediary variables, using ordered logistic Generalized Estimating Equations models. All analyses were performed separately by gender. Precarious workers were found to be in a lower socioeconomic position and to have worse health status. Univariate matched analyses showed that precarious employment was associated with worse health in both men and women. By further controlling for socio-demographic covariates, the odds ratios were attenuated but remained significant. Job satisfaction, especially as related to job insecurity, and monthly wage further attenuated the effects. This suggests that to improve health status of precarious workers in Korea, policy strategies need to tackle the channeling of the socially disadvantaged into precarious jobs. Also, regulations to eliminate discrimination against precarious workers in working conditions or material reward should be introduced and enforced. There is no doubt that job insecurity, which is pervasive among workers in Korea, should be minimized by suspending market-oriented labor policies which rely on quantitative flexibility.