This document summarizes remarks on education policy from the Economic Policy Council. It discusses trends in the level of education attained in Finland and other countries. It also examines returns to investment in education, issues around early education fees, class size, compulsory schooling age, vocational education reform, university admission systems, and university funding. Specifically, it notes that the expansion of education in Finland leveled off around 2000 while continuing to increase elsewhere. It finds education remains a profitable investment and returns to education are high and stable. It also discusses potential reforms and policies around these various issues.

1. Remarks on education policy
Economic Policy Council
Jan 23 2018

2. Topics
• Growth in the level of education
• Trends in cognitive skills
• Return to investments in education
• Early education fees
• Class size
• Compulsory schooling age
• Vocational school reform
• Admission system in higher education
• University funding system

3. Expansion of education level ended in Finland
around year 2000, while continued elsewhere
0
10
20
30
40
50
60
70
80
Turkey
Italy
SlovakRepublic
CzechRepublic
Portugal
Poland
Hungary
Latvia
Mexico
Slovenia
Germany
Luxembourg
Greece
Switzerland
Netherlands
Estonia
UnitedKingdom
Denmark
Australia
France
Sweden
Spain
Belgium
Korea
UnitedStates
Finland
Japan
Canada
2000 2016
25 - 34-year-olds with tertiary education in 2000 and 2016, % of cohort

4. Ranking depends on how education is measured
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
Korea
Canada
Luxembourg
Israel
UnitedKingdom
Australia
Ireland
Switzerland
Sweden
Norway
UnitedStates
Iceland
Denmark
Finland
Netherlands
Belgium
Estonia
NewZealand
Poland
OECD-Average
France
Latvia
Greece
Austria
Spain
Portugal
Germany
Hungary
CzechRepublic
SlovakRepublic
Chile
Turkey
Italy
Mexico
Highest education in age group 30 - 34
Source: OECD Educ at Glance database
Tertiary
Bachelor+
Master+

5. Increase in the number of entrants into universities
ended around 2000 and has then declined
0
5 000
10 000
15 000
20 000
25 000
30 000
net gross
New students in Finnish universities by year of entry

6. … particularly in Humanities, ICT and Engineering
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
New students in Finnish universities by field and year of entry

7. Fraction of cohort enrolled
at universities is declining
0%
5%
10%
15%
20%
25%
Fraction of birth cohort enrolled at universities at least once by age 24

8. … irrespective of in which age
enrollment is measured
0%
5%
10%
15%
20%
25%
20 22 24 26
Fraction of birth cohort enrolled at universities at least once by age

9. Fraction without secondary education
increased in 2000’s. Now trend reversed
0%
5%
10%
15%
20%
25%
Finnish born men Finnish born women
All men All women
Share of 25-year-olds with no education beyond compulsory schooling

10. Verbal and math skills of conscripts
have declined for last 20 years
Average scores by birth cohort in tests of verbal and mathematical
ability and visuospatial reasoning (in sd units, 1962 = 0)

11. Education, in particular university education,
is still a profitable investment
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 69
Primary Upper secondary Short-cycle tertiary
Bachelor's level Master's level Doctoral
€
Average monthly wages by age and education in 2016

12. Returns to education high and stable
5.0 %
5.5 %
6.0 %
6.5 %
7.0 %
7.5 %
8.0 %
8.5 %
9.0 %
Men
Women
Proportional increase in earnings associated with one extra year of education
(data restricted to workers employed for 12 months during the year)

13. Specific issues
• Early education
• Class size & PD funding
• Compulsory schooling age
• Vocational school reform
• Admission reform
• University funding system

14. Early education
Lowering the day-care fees
will improve incentives to
work and probably increase
employment
Early education may have
positive effects on cognitive
and social skills, particularly
for the most vulnerable
children
Poorest families unlikely to
react to changes in day care
prices as they are paying zero
fees already -200
-180
-160
-140
-120
-100
-80
-60
-40
-20
0
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
3600
3800
4000
4200
4400
4600
4800
5000
5200
5400
5600
5800
6000
Changeinmonthlydaycarefee
Change in day care fees by family income
Lone parent, one child in day care Lone parent, two children in day care
Two parents, one child in day care Two parents, two children in day care

15. Class size
Reduction of class size
improve student achievement
but is expensive policy
Specific grants to reducing
class size no longer awarded,
class size started to increase
slightly
Positive discrimination
funding targeting
disadvantaged areas may
have been successful
10
12
14
16
18
20
22
24
2008
2010
2013
2016
Class size in the comprehensive school

16. Vocational school reform
Vocational education will become
increasingly based on training in
firms.
Demonstrating specific
competencies will become more
flexible and less dependent on
the way that these competencies
have been acquired.
Risk: Importance of general skills
in higher education and in re-
training
Employment rates in 2014 for general and
vocational upper secondary education by age

17. Increassing compulsory
schooling age to 18
Could increase fraction that
graduates with secondary
education reduce share not in
employment, education or
training and increase earnings.
According to a background report
an increase in compulsory school
age
- has been effective in countries
such as US, UK, and Norway
but not in Germany or France
- could be fiscally neutral

18. Government steering in
research funding
- has increased due to
strategic research funding
and university profiling
- Figure displays funding of
Academy of Finland split
into general and
earmarked funds
0
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016 2017 2018
Non-earmarked Earmarked
EUR million

19. Research funding
reallocated
Between research institutes
Between research institutes
and universities
VATT FGI SYKE GTK TTL FMI THL LUKE VTT
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
EURmillion
Strategic Research Funding, 2015-2017 average
Direct budget funding, 2017
Direct budget funding, 2014

20. Admssion systems in
higher education
Admitting a larger share of
applicants based on matriculation
examination results will make the
system more efficient.
It also may improve allocation as
applicants are placed also to
second-best options.
Universities should develop flexible
ways of switching between
programs and complementing
studies with modules from other
programs