Higher education cuts threaten to undermine Finland’s standing as leading innovator

Savage cuts to higher education budgets in Finland are forcing Finland’s Aalto University to axe 350 jobs - 17 per cent of the workforce - as it faces up to a fall of €66 million in government funding by the end of 2018.

For a country entering its fourth year of recession, this kind of painful austerity blitz is a familiar prescription. However, in the run up to parliamentary elections last April, the parties now governing the country made promises to leave education alone.

The promise was not kept: “The cuts were unexpected, sudden and very large,” says Tuula Teeri, Aalto’s President. “When we can plan, we can adjust,” Teeri told Science|Business. “What followed was additional tens of millions of cuts, that were unanticipated.”

The returns of the Aalto endowment portfolio is providing some buffer for managing the cuts, but not enough to avoid layoffs.

“Aalto is now forced to downsize its operations,” said Teeri. “It’s a tremendous loss of potential as we are just beginning to reap rewards from our progressive development during our first five years. We will have to do things slower, at a time when Finland needs innovation-driven growth more than ever.”

Other Finnish universities find themselves in the same boat. Helsinki University in September said it would cut 1,200 jobs by 2020, in an effort to save €86 million.

The cuts to Helsinki University, relatively speaking, are about the same as those made to Aalto, said Teeri. “So, even cuts across the board, but not strategic ones,” she said. “We can manage such cuts for a little while but you have to make sure you don’t interrupt research-driven innovation over the longer term.”

“And with a national mission to strengthen Finland through first-class research, art and education, innovation is at the heart of everything we do,” Teeri said.

Losing poster child status

At first blush, Finland’s problems are surprising to the outsider. The country has been ranked among the top 10 most competitive economies in the world by the World Economic Forum and the Finns have been riding the wave of a start-up craze for past 10 years.

Startup Sauna, a co-working hub, and Slush, Helsinki’s start-up mega-meeting, are much-celebrated staples of the Finnish entrepreneurial scene originating from the Aalto University ecosystem.

And there is no shortage of good ideas coming out of Aalto, Teeri claims. Aaltoes, or the Aalto Entrepreneurship Society, a student-run body, has been recognised as a major spark plug for Finland’s start-up world. “We are not managing students. We are letting them do what they want – and it pays off,” said Teeri.

Despite innovation hot spots, Finland’s economy has been shrinking for three years. Spiralling wage costs have reduced competitiveness, and the euro zone debt crisis and slump in exports to Russia have also taken their toll.

After Greece, Finland had the worst performing economy in Europe last year, forcing the new centre-right government coalition to start trimming back the size of a state. Everything from the labour market to healthcare, local authorities and tax is up for reform.

With all the economy’s mainstays in retreat, several shocks are converging at once, Teeri said.

The decline of the country’s most successful company, Nokia, was probably the biggest blow, she believes. In its heyday Nokia was the world’s largest mobile phone maker, worth roughly €134 billion and accounted for 4 per cent of the country’s GDP.

There has also been a large shift in the forestry industry, Teeri noted. Jobs in cultivating trees, traditionally a Finnish strength, have moved to the Southern hemisphere. “Countries there can grow mature trees in 12 years – for us it’s 60 years,” she said.

At the same time paper production, another major export, is decreasing all the time, reflecting the decline of newspaper sales. 

Today the video games sector is Finland’s most obvious strength. The industry has grown dramatically in the last decade. In 2004 the country’s 260-odd game developer studios had turnover of almost €2 billion, up from €40 million in 2004.

About 2,600 people work for games companies in Finland; at its peak Nokia once employed more than 125,000 employees. “Gaming is a great new business model, although it doesn’t employ a lot of people - and the competition is fierce,” Teeri said. It is estimated 14 new games are released every hour around the world, with the top 10-selling games pulling in 90 per cent of all global gaming revenue.

Teeri has lived through a few crises and knows they are not quickly remedied. She sees the challenge faced by Finland today as similar to the one faced by the country 25 years ago. In the early nineties, a number of Finnish companies went bust following the collapse of the Soviet Union, as Russia transitioned to a market economy and began making a lot of the things it used to import from Finland.

Teeri’s biggest fear now is that the education cuts will spark a brain drain. “Look at England in the eighties – people left. They were difficult to bring back. It also happened in Japan in the nineties. People left – there was nothing left to innovate on.”