Eight Years of College Lets Finns Hide From Labor Market

Photographer: Tomi Setala/Bloomberg

A visitor enters an employment office for jobseekers in Helsinki, Finland, on Aug. 5, 2014. Students in Finland are staying in college longer to avoid the job market as recessions, Nokia's troubles and a decline in trade with Russia add to the unemployment rolls. Close

A visitor enters an employment office for jobseekers in Helsinki, Finland, on Aug. 5,... Read More

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Photographer: Tomi Setala/Bloomberg

A visitor enters an employment office for jobseekers in Helsinki, Finland, on Aug. 5, 2014. Students in Finland are staying in college longer to avoid the job market as recessions, Nokia's troubles and a decline in trade with Russia add to the unemployment rolls.

Tuomo Kareoja, who’s starting his eighth year of studies at Helsinki University, is pondering adding a fourth degree to his current majors in history, social psychology and statistics.

He’s hiding from the labor market, which suffered as Finland (FIGDPCH) grappled with two recessions over the past six years. The 27-year-old has tapped help from the government and his family, while yearning to enter work life for real.

“When I tell people I’m a student, it tells them I’m achieving something compared to being jobless,” he said, sipping green tea at a cafe near the university’s main building. “In reality, there might not be such a big difference.”

Finland’s economy, ravaged by the troubles of Nokia Oyj and losses in its paper industry, is now struggling to make up for waning demand in the weakening Russian economy, one of its largest export markets. Trade sanctions imposed by the European Union and Russia on each other have worsened the outlook. Young people are staying in school to avoid joining the ranks of the unemployed, who now make up more than 9 percent of all workers, compared with a low of 5.2 percent in mid-2008.

Finnish students stay in college longer than in any other developed country save Austria, the Netherlands and Denmark, getting their first university degree on average at 29, according to a 2013 report by the Organization for Economic Cooperation and Development. That compares with 24 years for Britons, 26 for Germans and the OECD average of 27 years. Most Finns who graduate from college get a master’s degree.

Free Schooling

Easing the long years in college is the fact that students aren’t required to pay tuition. The state also provides grants of as much as 500 euros ($670) a month plus meal support and loans of as much as 400 euros a month. While education is a safe haven for students, the economy suffers when they put off joining the job market and don’t have skills the labor market needs, said Hannu Kaseva, an economist at ETLA research institute in Helsinki.

“Our education system is generating more bums for us,” he said by phone. “Think about the wasted investment when just half of all graduates find work suitable for their education.”

Encouraging universities to cooperate with potential employers would reduce the theoretical nature of studies and help bridge the skills gap, he said. The country doesn’t train enough doctors, nurses and dentists, according to the Economy Ministry. Finland has an oversupply of office workers and IT engineers after Nokia’s success making mobile phones in the early 2000s soured, culminating in the sale this year of its flagship handset unit to Microsoft Corp. (MSFT)

Temporary Contract

Antti Niskanen, 28, graduated last year with a master’s degree in management from Aalto University School of Business. He found a labor market that holds little promise: He’s been applying for jobs that would suit his education since September 2012, when a temporary contract at OP-Pohjola banking group ended. He worked for a short period as a teller at currency exchanger Forex Bank AB.

“When I got into university, I thought, ‘This is it, I’ve got everything sorted out, and I won’t have to worry about employment,’” he said at a cafe-bar in the Munkkiniemi neighborhood of Helsinki. “It’s really depressing to hear you’re one out of 200 or so applicants. Of course this affects larger things -- having kids, buying a home. Everything’s on hold.”

While Finland’s two recessions since 2008 have pushed companies to cut jobs, unemployment has risen less than in many of its European peers. At the same time, so-called hidden unemployment is on the rise. The number of people not seeking work though they’d like to find it increased 10 percent in June from a year earlier.

Permanent Impact

The effects of unemployment can be lasting. Many graduates who didn’t find jobs during the 1990s recession never recovered. About 11 percent of those finishing a degree in 1992 were unemployed five years after graduation, according to a one-time study by Statistics Finland.

The government, which has struggled to keep debt growth under control and stuck to austerity measures over the past four years, doesn’t object to people staying in school and off the jobless rolls.

Last year, then-Finance Minister Jutta Urpilainen pushed the government to devise a program promising everyone under 25 and fresh graduates under 30 a job or a place to study within three months of becoming unemployed. It hasn’t worked for about 31 percent of young adults, who at the end of June hadn’t found a job in three months. The figure was 24 percent a year earlier, according to data by the Economy Ministry.

About 14 percent of Finnish students study for more than one higher level degree, according to the Ministry of Education. Half of full-time students work while in school and 89 percent of part-time students do.

Policy Choice

Only about 50 percent of all university students graduate in five-and-a-half years or less, Helsinki-based Statistics Finland says. One-third of graduates are 30 years old or more, compared with an EU average of 17 percent, Eurostat says.

“School has traditionally acted as a buffer when the economic situation is bad,” said Ulla Haemaelaeinen, a senior researcher at the Finnish Social Insurance Institution in Helsinki. “It’s a policy choice.”

Finland’s gross domestic product has contracted in three of the past five years and remains below its 2007 level. Exports to Russia, which account for about 10 percent of sales abroad, have declined 14 percent so far this year through May. GDP will shrink 0.2 percent this year, the third consecutive drop, according to a Bloomberg News survey of 13 economists.

Germany’s Peer

The youth unemployment rate, which excludes students, at 20.2 percent remains below the EU average of 22 percent, according to the bloc’s statistics office. It’s worse than in AAA-rated peers Germany, at 7.8 percent and Denmark, with 12.6 percent.

“Working shorter periods means young people postpone settling down,” Labor Minister Lauri Ihalainen said in June. “This can’t be downplayed.”

A silver lining: More people in Finland are retiring each year than entering the work force. While costly to the nation’s health and pension system, the aging population may let older workers make room for younger ones, Ihalainen said, adding: “I don’t see young people’s future as that grim.”

That’s no solace to Kareoja, who says he wants to put his studies to use at a proper job rather than taking on more short stints at a hospital, where he’s worked at the morgue and transcribed doctors’ notes.

“It’s nice to shop around with studies,” he said. “It would also be nice to see what different jobs really are like.”

To contact the reporter on this story: Eero Vassinen in Helsinki at evassinen@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net Anne Swardson, Kati Pohjanpalo

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