Funding of the Finnish higher education system: equity perspectives

Brown Bag Presentation,

Michigan State University, Spring 2012

Dr. Jussi Kivistö, Higher Education Group, School of Management, University of Tampere, Finland

Fast facts: Finnish higher education system

• 41 higher education institutions• 16 universities (2 private) • 25 universities of applied sciences (14 private)

• About 300,000 enrolled students• universities: 170,000 students of which 18,500 doctoral students (114,000

FTE students) • universities of applied sciences: 126,000 students (113,500 FTE students)

• Ranked in 2010 as the most accessible and affordable higher education system in the world (Global Higher Education Rankings 2010: Affordability

and Accessibility in Comparative Perspective) • One of the most publicly funded systems in the world

• no tuition fees (for domestic and EU students) + relatively generous student aid system

• annual public HE expenditure 3.9 billion euros ($ 5.1 billion)

Equity?• “Equitable tertiary [i.e. higher education] systems are those that ensure that

access to, participation in and outcomes of tertiary education are based only on individuals’ innate ability and study effort. They ensure that the achievement of educational potential at tertiary level is not the result of personal and social circumstances, including of factors such as socio-economic status, gender, ethnic origin, immigrant status, place of residence, age, or disability.” (OECD 2008, p. 14).

• Equity of access: opportunities to enter higher education• Equity of outcomes: opportunities to progress and complete tertiary studies

and also to achieve particular returns to higher education• Equity of distribution: distribution of costs and benefits of higher education

Equity in Finnish higher education

• Who participates in higher education? (access)

• Who benefits from higher education? (outcomes) (distribution)

• Who pays higher education?

Who participates?

Usher & Medow: Global Higher Education Rankings 2010

Affordability and Accessibility In Comparative Perspective.

Who participates?

• Finnish students in universities and universities of applied sciences are predominantly from upper and middle class families

• According to the national student survey in 2010:

• 83% of students categorize their socioeconomic background as ”upper” or ”middle class”

• 49% of students categorize their socioeconomic background as ”upper class”

• Upper class students are overrepreseted especially in Medical Science (76%), Law (60%) and Business (57%)

Who benefits?

• 2009 Finnish graduation rate was 44% • (U.S. 38%, OECD ave. 39%)

• In 2007 private internal rate of return (males 11,1%, 9,0%) females) is higher than the public rate of return (males 8,9%; females 5,7%)

• For comparison: private (m/f) public (m/f)• U.S. 11,3% / 8,3% 15,7% / 11,4%• OECD average 12,4% / 11,5% 11,1% / 9,2%OECD (2011). Education at a Glance.

Paris: OECD.

Who pays?

• Proportion of public expenditure on Finnish higher education institutions in 2008 was 95,4% (3rd highest in the world)

• EU average 78,2% • OECD average 68,9%• U.S. 37,4%

• Total public expenditure on Finnish higher education as a percentage of GDP was 1,9% (3rd highest in the world)

• EU average 1,3% • OECD average 1,3%• U.S. 1,3%

OECD (2011). Education at a Glance. Paris: OECD.

Who pays?

• Public funding = tax revenues• in 2010, Finnish overall tax rate

(tax revenue as % of GDP) was 42,1%, 6th highest in the world (U.S. 24,8%)

• but only 1/3 of the taxes are related to income or wealth

Some conclusions

• Finnish higher education system is one of the most equitable in the world in terms of equity of access.

• Finnish higher education system has some problems with equity of outcomes.

• Finnish system have clear problems with equity of distribution.• no tuition fees• over-representation of upper- and middle class students• higher private rate return than the public rate of return• extensive public funding• taxation system where 2/3 of tax revenue is not based on income or

wealth

Some conclusions

• Tuition fees are a political taboo in Finland: it is very difficult to explain why parents need to pay e.g. 2,500 euros per year for public day-care of a child, but higher education is free of charge

• Possible (although unlikely) policy solutions• introduction of tuition fees AND income-contingent loan system (Australia,

England): for instance, 2,500 euros annual tuition would bring more than 400 million euros for the Finnish higher education system

• introduction of a graduate tax –system