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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)
• “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)
• 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
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.
• OECD average
11,3% / 8,3%
12,4% / 11,5%
15,7% / 11,4%
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
• 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
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