Finland’s population is ageing faster than many other European Union (EU) member states’ populations. Furthermore, like many other countries, Finland has been experiencing a slow downward trend in fertility. However, the Finnish fertility rate, which used to be among the highest in the industrialised world, has dropped dramatically in the 2010s. These trends and changes are not attributable to any single event or policy decision. In almost all regions of Finland, the population is rapidly declining.
The European Union’s statistical office, Eurostat, has produced population projections for various European countries up to 2100. According to these forecasts, the entire population of Finland would decrease by approximately one million, while in the neighbouring Sweden and Norway, the population growth would be approximately four million and one million, respectively. Population growth in neighbouring countries has been calculated to primarily result from immigration.
This situation is worrisome. A shrinking and ageing population places its own limits on the maintenance of essential economic and social functions. It is increasingly difficult to fund key social and health services and find enough manpower for different sectors to maintain vital activities. The problem is particularly dire in the high-tech and knowledge-based sectors.
The Oulu region and Oulu’s technological ‘miracle’ provide pertinent examples. The closure of Nokia’s telephone production in the early 2010s strongly affected the Oulu region. Suddenly, thousands of high-tech engineers were unemployed. Meanwhile, the collapse of the Nokia telephone freed high-tech experts for various technological tasks, and the former Nokia employees diligently launched their own businesses. In the 2010s, hundreds of high-tech companies were established in Oulu, utilising highly skilled experts freed from Nokia. That expertise has been successfully utilised in both private and public service production, creating the Oulu technological ‘miracle’.
Now that the knowledge reserve released by Nokia has been used, Oulu excels in high-technology education. The University of Oulu and the Oulu University of Applied Sciences (Polytechnics) specialise in digitalisation, conducting research, and producing hardware and software for various purposes, ranging from 5G and 6G networks and devices to digital applications for social and health care.
However, training and education are too slow to meet growing demand. Even if education is made increasingly attractive, the shrinking age groups associated with the aforementioned demographic changes will complicate the situation. There are simply not enough young people to be trained by experts.
Due to the shortage of a sufficient labour force, several Oulu-based technology companies struggling with labour shortages have outsourced their operations outside of Finland. The reason is precisely the shortage of experts, rather than Finnish high wages, indirect labour, and other costs often criticised as motivating outsourcing.
There are two options. First, operations are increasingly being relocated abroad, for example, to India, where there is a large supply of expertise and highly skilled engineers. In this case, the production benefits flow abroad and, in the best scenario, indirectly to Finland through the profits paid to shareholders. Another option is to maintain operations in Finland and recruit foreign experts on a large scale.
Attracting foreign experts to Finland does not constitute a problem in itself. Finland has a stellar reputation: a safe, clean, equal, prosperous, non-corrupt, child-friendly, and overall well-functioning society. For the fourth year in a row, Finns ranked first in global happiness measurements.
In fact, there would be enough immigrants to fill the labour shortage. The problem is the slowness of Finnish immigration and work-permit processes. Although attempts have been made to accelerate the work permit processes, they remain exceedingly rigid and slow for many companies wrestling with their urgent need for employees.
Our solution to the burning labour needs of high-tech companies is to reform and significantly accelerate the work permit procedure. Reform can be built based on the following principles. Based on the job interviews, employers could, at their own expenses, bring foreign experts to work on probation in Finland. During the probationary period, the necessary residence and work permits tied to the employment contract would be obtained for the experts, after which the actual employment contract would be concluded.
The employment contract would be consistent with general practice in the sector and follow general labour market agreements. The procedure would provide a faster and more flexible process that better meets the needs of companies. Conversely, it would emphasise the responsibility of the recruiting company for the integration of workers and the achievement of equal working conditions.
The reform is urgent. The needs of companies are immediate, and the shortage of skilled labour is already acute and constantly deteriorating. Therefore, companies must outsource their operations. Once such outsourcing is accomplished, it is difficult to transfer the functions back to Finland. Thus, reform must be implemented now. The sitting government should address this issue quickly.
The projected demographic trend appears bleak but not hopeless. There are major demographic and labour supply challenges. However, it is in Finland’s and Finns’ own hands to choose how to address them. There would be newcomers to Finland, but will we receive them?
Olli Kangas, Professor of Practice , University of Turku, Program Director Strategic Research at Academy of Finland
Jussi Lemiläinen, CEO of QuietOn in Oulu
The article was initiated in the context of the H2020 Beyond4.0 project company interviews in Oulu. It was first published in Finnish 5 July 2021 in the Turun Sanomat newspaper.