Home (2024)

1.2.1. The economic context

Finland’s economy has recently recovered from a near-decade of economic difficulties. The global economic crisis affectedeconomic growth in Finland more negatively than in other OECD countries, including Norway and Sweden (Figure1.1). The economy had barely recovered from this shock when the key industries faced major difficulties: electronics, with thecollapse of Nokia, and forestry, with a decreased demand for paper products. A severe recession in Russia, an important tradingpartner, also had negative effects (OECD, 2018[2]). Despite the lingering effects of the Russian downturn and trade sanctions, Finland managed to return to positive economicgrowth in 2016 and 2017, when GDP rose by 2.4% and 2.8% respectively. In 2018, seasonally adjusted quarter-to-quarter growthrates remained at similar levels.

Multiple factors contribute to a lower per-capita income in Finland compared to leading OECD countries. At around USD46000, Finnish GDP per capita is around USD2000 higher than the OECD average. Nevertheless, Sweden and oil-rich Norway benefitted from per-capita incomes that are USD 5000 and 16000 higher in purchasing power adjusted terms, respectively. Lower labour productivity is one reason that GDP per capita is lower than elsewhere, and low labour utilisation another. In fact, as will be seen in the next section, the Finnish employment rate is comparatively low.

1.2.2. Labour market outcomes of young Finns

The global economic downturn of 2008-09 disproportionally affected youth across advanced industrialised democracies. Given that relative to older workers, younger individuals have less work experience and more frequently have short-term work contracts, many are in a more precarious situation in the labour market and more vulnerable to economic downturns. Young people in Finland were no exception to the general trend in the OECD: youth employment rates fell and unemployment rates rose throughout the recession and have not fully recovered since.

Employment in Finland dropped more for young people than for other working-age adults and continues to be lower compared toits Nordic neighbours for both age groups. The Finnish youth employment rate sharply declined in the years following the financialcrisis, from 57.6% in 2008 to 53.0% in 2009. Since then, it has only marginally increased to 54.6% in 2017 (Figure1.2, Panel A). In contrast, at 76.2%, the employment rate of older working-age adults (aged30-64) is only slightly below the 2008 level of 76.6%. Employment rates in 2017 were slightly higher in Finland than OECD averages but markedly lower than in Norway and Sweden (Figure1.2, Panel B).

Military service does not figure in these employment rates. The 1.5% of youth aged15-29 who were completing their military service in 2017 are excluded from the employment rate calculation. In Finland, military service is mandatory for young men fit to serve and lasts from six to twelve months. Conscientious objectors can opt for non-military service lasting a year (Ministry of Economic Affairs and Employment of Finland, n.d.[3]). This share of conscripts among youth is the same as in Austria and higher than the 1.2% in Estonia and the 0.8% in Norwayand Korea. In contrast, nearly two thirds of OECD countries have abolished or suspended conscription.

The employment participation of young men and women has opposing effects on Finland’s performance relative to the OECD average.In 2017, 56.3% of Finnish male youth were employed, compared to an OECD average of 57.8%. In contrast, the Finnish youth employmentrate among women (52.9%) compares favourably with the OECD average (48.7%). Nevertheless, to catch up with its Nordic peers,the gap that needs to be closed is even larger for young Finnish women than for their male counterparts. For example, theemployment rate of young Finnish women is more than five percentage lower than that of young Swedish women, while the differenceamong men is less than two percentage points.

Only one in three young Finns works exclusively and an above-average share combine studying and working. Whereas an averageof 13.1% of youth were both working and enrolled and education or training programmes across the OECD in 2017, in Finland,the share was 19.6% (Figure1.3). Nevertheless, this share is once again lower than in most other Nordic countries with the exception of Sweden. About athird of employed young Finns are working part-time, a rate above the OECD average but below the Netherlands (64%) and Norway(44%). More than two thirds of these young part-time workers are currently in education.

The combination of work and education can partially explain why part-time employment is more common among young than middle-aged workers. However, in 2017, Finnish youth were also more than twice as likely to find themselves in involuntary part-time employment than employed individuals aged30-64: 9.2% of young people were involuntary part-time workers, a rate well above the average of 5.9% among OECD countries for which the information was available and the 3.8% of middle-aged Finns. Moreover, compared to pre-crisis levels, the share of involuntary part-time employment remained relatively stable among the middle-aged employed but rose from 4.9% for young people.

A relatively high proportion of Finnish youth also hold temporary jobs. In 2017, 43.7% of 15-24year old employees had temporary contracts. They are hence more than three times more likely to have temporary contracts than prime-aged employees are (13.3%). The Finnish youth temporary employment rate is lower than in neighbouring Sweden (53.8%) but higher than the OECD cross-country average (37.0%) and other Nordic countries including Iceland (25.3%) and Norway (26.4%).

Youth unemployment is much higher in Finland than in the OECD on average. In 2017, the unemployment rate among 15-29year olds was 14.7% in Finland, compared with 9.8% across the OECD, 7.8% in Norway and 12.8% in Sweden (Figure1.4, Panel A). The impact of the two recessions was particularly strong among young men (Figure1.4, Panel B). Moreover, while the unemployment rate of 30-54year olds is also higher than in peer countries or the OECD average, the changes throughout the last decade were much less pronounced.

More positively, Finnish youth are usually unemployed for a short time. The average duration for 15-24year olds was only 3.3months, the second lowest duration after Canada (2.5months) among the nine OECD countries for which the statistic is available. In Norway, the average length of an unemployment spell was 4.6months. While the share of these unemployed youths in Finland who remain unemployed for half a year or longer has risen from 9.7% in 2008 to 14.3% in 2017, 2008 was an outlier with a particularly low duration. Finland remains among the countries were the fewest unemployed youth remain unemployed for a medium or longer term. Across the OECD, the share is twice as high (28.9%). In Norway and Sweden, 30.9% and 21.5% of unemployed youth, respectively, were in this category in 2017.

1.2.3. Educational attainment of Finnish youth

Finland’s education system is often considered a leading example for other advanced democracies. The country has consistentlyscored high in international comparisons of student performance and offers primarily publicly-provided, tuition-free, high-qualityeducation to its citizens (OECD, 2017[5]). Strengths of the system include that teaching is a high prestige occupation with relatively good salaries (OECD, 2014[6]); teachers stand in front of small class rooms for comparatively few hours per week; and teachers have the training to identifypupils with special needs and the resources to provide them with the needed support (OECD, 2013[7]).

An above-average share of young Finns attain upper or post-secondary degrees that often focus on vocational skills. In 2017, 90% of Finnish individuals aged25-34 had completed at least an upper-secondary degree, compared to 85% across the OECD, 81% in Norway and 87% in Sweden (Figure1.5). Compared to the OECD average (44.5%), fewer young people (41.3%) have a college or university degree. In contrast, vocational education is common and well developed. In 2015, almost half of 15-19year olds in upper secondary education were enrolled in a vocational programme, the highest share across OECD countries and three times higher than the average. Unfortunately, students in vocational education are much less likely to complete their studies than their peers in general programmes (see Chapter 2).

1.3.1. NEET rates

Finland does not have a massive NEET problem, but there is room for improvement. The share of young individuals in Finlandwho are NEETs (11.9% in 2017) may be somewhat lower than the OECD average (13.4%) and drastically lower than in a many countriesin Latin America and Southern Europe (Figure1.6, Panel A). However, it is much higher than in other Nordic countries, including in Norway and Sweden (both at 8.6%). 61%of NEETs in Finland were inactive, about equal to the OECD average of 63%.

The economic crisis had a stronger impact on young Finns in their early twenties and on the share of unemployed rather than inactive youth. Compared to 2007, the NEET rate has increased by 2.4percentage points in Finland, while across the OECD, the rate dropped slightly by 0.4percentage points. The increase was strongest among 20-24year olds (3.1percentage points), followed by 25-29year olds (2.5percentage points). Among 15-19year olds, the increase was 1.0percentage points. Business cycles generally have a stronger impact on the number of unemployed rather than inactive NEETs. This is true across the OECD as well as in Finland (Figure1.6, Panel B). However, while the share of inactive NEETs trended downwards from 2010-16 across the OECD, it increased in Finland. Even though both of these trends reversed in 2017, it suggests that the Finnish NEET challenge has become more entrenched.

NEET populations are proportionally more important outside the most densely populated region of Helsinki-Uusimaa. While theirshare in the capital region was 9.7% in 2017, in other regions the corresponding figure was above 12%. In the most sparselypopulated areas of Northern and Eastern Finland, 14.0% of youth were NEETs. NEET populations in rural areas can be harderto reach and may receive fewer services, suggesting a need for targeted interventions.

1.3.2. Characteristics of NEETs

Finnish NEETs are more likely to be female, less educated and foreign-born than the general Finnish youth population.

Across the OECD, young women are more frequently NEETs than young men. In Finland, the difference of 1.7percentage points (12.8% compared to 11.1) amounts to only one third of the average OECD difference of 5.1percentage points (16.3% compared to 11.2%). The difference is nonetheless larger in Finland than in other Nordic countries such as Norway (0.3percentage points) or Sweden (0.6percentage points). In Finland, the difference is entirely due to young adults in their late twenties. In this age group, 19.3% of women and 12.0% of men are NEET. At the younger ages of 15-24years, women are less likely to be NEET than men are.

Differences in how men and women adjust their labour force participation to parenthood contribute to these patterns. Declaredreasons for inactivity back up the hypothesis: Half of inactive male NEETs stated that their main reason for being inactivewas that they were sick or disabled (compared to 31% across the OECD), while half of female NEETs cited family responsibilities(compared to 54% across the OECD) (Figure1.7). In fact, according to the EU Statistics on Income and Living Conditions Survey data, in 2017, 46% of young Finnish womenwith children under the age of five were NEETs, more than five times the rate among young Finnish fathers with children inthe same age group. The rate is comparable to the OECD average (48%), but much higher than in Norway (19%) or Sweden (15%).Overall, slightly more than one quarter of NEETs in Finland are mothers with young children, a share comparable to the OECDaverage. The generous parental leave policy in Finland (Adema, Clarke and Frey, 2015[9]) apparently encourages many young mothers stay at home during the first years of their child’s life. Other Nordic countriesinstead opt for shorter though still very generous maximum lengths of parental leave in combination with higher average paymentrates

Young Finnish NEETs are more likely to have low levels of educational attainment. In all OECD countries, individuals in theirlate twenties who did not complete upper secondary education have a higher likelihood of being NEETs than those with higherlevels of educational attainment (Figure1.8). The difference is even larger in Finland: In Finland, the NEET rate among those with low levels of education (44.1%) is 3.1times higher than among those with upper or post-secondary education (14.2%). Across the OECD, it is only 2.2times as large. The difference between the NEET rates for medium (14.2%) and high educational attainments (10.5%) is less pronounced than in some, but by no means all, OECD countries. The NEET rates of Finnish women with medium and high levels of education are about ten percentage points higher than for their male peers, while the rates for men and women with low levels of education are practically equal.

Higher NEET rates among the less educated are mirrored in higher NEET rates among the less skilled. In 2012, people aged25-64 living in Finland with low literacy (level 1 or below in the Survey of Adult Skills) were more than twice as likely to be NEETs as people with literacy level 2 (34% compared to 16%). Across the participating OECD countries, the difference was less drastic (29% compared to 18%). The difference in mean literacy scores between NEETs and employed individuals was 24 in Finland and 20 across the OECD (out of a scale of 600). However, it also needs to be noted that the mean literacy scores of NEETs in Finland (280) was higher than the average of mean literacy score across the OECD (278), reflecting the quality of the Finnish education system (OECD, n.d.[10]). In fact, since those with very low levels of literacy or numeracy only represented 15% of the Finnish population in 2012,the second lowest share in the OECD (OECD, 2016[11]), NEETs who are low performers only represent a small share of all NEETs despite the fact that they are over-represented amongNEETs.

In addition to basic foundation skills, non-cognitive abilities, such as self-confidence, communication skills or sociability,are also important determinants of educational and labour market outcomes. While a study of a half a million Finnish men foundthat non-cognitive skills have improved over time (Jokela etal., 2017[12]), research in the Swedish context suggested that some men’s poor labour market outcomes were attributable to the lack of non-cognitive,rather than basic foundation skills (OECD, 2016[13]). Mourshed, Patel and Suder (2014[14]) also found that employers in Sweden raised concerns about youth’s “soft skills” rather than their linguistic, numeracy orgeneral competency. Deficiencies in such abilities likely explain part of NEET youth’s challenges finding employment or poorereducational outcomes, at least in the Nordic context where cognitive skills proficiency is high.

A higher proportion of foreign- than native-born youth are NEETs in Finland, but their overall share among NEETs is limited. The difference between the two NEET rates in Finland (17.3% among foreign-born compared to 11.6% among native-born youth) is similar to the OECD average, but above that observed in a few countries such as Hungary, Iceland and Ireland. However, in Finland as well as in a few other OECD countries such as Germany and Sweden, the NEET rate of the foreign-born may have been significantly affected by recent inflows of asylum seekers (Box 1.1). The impact of these inflows however already appears to have declined significantly: while in 2015, 11.2% of NEETs were born abroad, this share had dropped to 7.8% by 2017. In contrast, the share of foreign-born among all youth in Finland dropped only be 0.1percentage points over the same period.

1.3.3. Well-being of NEETs

The difficulties some NEETs face can have major and lasting consequences for their health, subjective well-being and outlookon their lives and society. NEETs report lower well-being and health and more pessimistic opinions than youth overall, butthe gap is lower in Finland than elsewhere.

The gap in life satisfaction between Finnish NEETs and Finnish youth overall is not as wide as the average across OECD countriesthat are also member states of the EU. In 2013, 13% of Finnish NEETs reported low life satisfaction, compared to 4% amongyouth overall (Figure1.11). This well-being gap of nine percentage points was below the average of 17percentage points across EU-OECD countries, as well as below the 16percentage points in Sweden and the 29percentage points in Norway. In fact, the share of Finnish NEETs reporting high life satisfaction was larger than the cross-country average for all young people. At the same time, the gap in well-being between NEETs and non-NEETs in Finland should also not be minimised: For example,according to a Finnish survey, the rate of youth reporting being lonely was twice as high (69% compared to 35%) among NEETsthan among all youth. Even more drastically, one in five NEETs compared to one in fifty among all youth reported being pessimisticabout their future (Gretschel and Myllyniemi, 2017[18]).

Nevertheless, the high life satisfaction of Finnish youth appears to affect their trust in politics and other people. Theshares of all youth (28%) and of NEETs only (42%) who report no or low trust in the political system are lower than in anyof the other European OECD country for which data are available, and well below the average across these countries (67% amongall youth and 77% among NEETs, respectively). The pattern is the same for trust in people. However, only 42% of Finnish NEETshad a strong attachment to Finnish society, compared to three quarters of all youth (Gretschel and Myllyniemi, 2017[18]).

NEET status is associated with poorer physical and mental health. According to a recent study, one in five Finnish NEETs hasa disability or long-term illness, compared to only one in ten among youth in general (Gretschel and Myllyniemi, 2017[18]). The share of Finnish youth who report being limited in their activities over the last six months due to health problems is overall larger than across the OECD, but the relative – though not absolute - difference between NEETs and non-NEETs is smaller. In Finland, 32.5% of NEETs and 18.4% of non-NEET youth reported such a limitation, while the OECD cross-country averages are 13.1% and 5.7%, respectively.

Poor health can significantly reduce individuals’ work capacity and hence lead to a higher NEET rate, but being inactive can likewise negatively affect physical and in particular mental health. A longitudinal study of the Finnish 1987 age cohort shows that over the 2003-12 period, almost one fifth of Finnish NEETs (19.4%) had utilised secondary in- or out-patient mental health services, compared to only 7.6% of non-NEETs (Larja etal., 2016[19]).

1.3.4. Duration of NEET status

Longer NEET spells are comparatively rare in Finland. From 2012-15, about one in three Finnish NEETs spend more than twelve months as NEETs (Figure1.12). This is well below the one in two NEETs across European OECD countries for which the information is available, though abovethe one in four youth in Iceland. Longer NEET spells can have lasting and profound negative effects on young individuals’educational and employment outcomes and well-being.

Low education and low parental education are risk factors for remaining inactive for prolonged periods. Data from a study of the 1987 cohort shows that youth that did not experience any NEET episode over the 2003-12 period rarely had parents that only completed basic education and themselves mostly progressed past secondary education (Figure1.13, Panel A). In comparisons, among young people that were NEET for one year over the same period, the share with low educationalattainment already doubled to 15%. Among individuals with two to ten years of NEET status over the period, the same sharereached 41%. Differences in the share with parents with basic education, in contrast, exist but are less pronounced. Othermeasures indicative of a more disadvantaged socio-economic background rise more strongly with the length of the NEET status.For example, the share of youth whose families had received social assistance more than doubles from 28% among those withoutany NEET spells to 57% among those that were NEETs for two or more years (Larja etal., 2016[19]).

The correlation between poorer health and NEET status is particularly strong for young Finns that remained NEETs for longerperiods. Youth that are in poor health are around 3.5 as likely to be NEETs for more than twelve months over a four-year periodcompared to healthy youth. Regarding mental health, the share who have benefitted from outpatient mental health services increasesby 50% for those that were NEETs during one year compared to those that were not (from 8% to 12%), and then almost doubles(to 23%) among those that remained NEET for two or more years (Figure1.13, Panel B). Unless non-NEET youth are drastically less likely to use mental health services than NEET youth with similar mentalhealth issues, this suggests that the likelihood of having mental health problems rises with the length of the NEET spell.Two different mechanisms likely contribute to this outcome: First, young people with mental health problems likely have moredifficulties finding or holding down a job or pursuing a degree, making it more likely that they become (long-term) NEETs.Second, the social isolation and lack of perspective that NEETs may experience can in themselves, contribute to the onsetof and exacerbate existing mental health problems.