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Lack of recognition leads many highly educated immigrants to entrepreneurship

The inability to find a job commensurate with their education leads many immigrants to start their own business. As a consequence, Finland stands out for having a large number of university graduates and even PhDs among its foreign entrepreneurs.

Finland tends to shine internationally as one of the best places to study and make a career. The country's economy ranks among the top in IT and digitalization and is well known for producing high value-added goods and services. For this reason, and also because of the high standard of living that Finns enjoy, every year many highly educated students and professionals move to Finland in the hope of finding their place in a country famous for its innovative capacity.

According to data from Statistics Finland and the National Agency for Education (OPH), in 2019 nearly 25,000 foreigners applied to study a higher education programme in English in Finland. The same year, foreign students achieved about 8 percent of all university degrees and one in four doctorates in the country was completed by a foreigner.

Those statistics confirm that Finland has enough appeal to attract the best brains in the world. But recently, more and more studies suggest that something is not working so well when it comes to harnessing the skills of that human capital. In other words, the country is not benefiting from all the talent it generates and has at its disposal.

Christopher Harper's study on 'The Mindset and Motivation of Immigrant Entrepreneurs in Finland' for the Hanken School of Economics highlights the stark reality experienced by many highly educated immigrants in Finland. And it explains that many of them end up becoming entrepreneurs because local companies refuse to hire them.

When looking for work, many foreigners are rejected again and again. Sometimes this happens because they do not speak the language well enough or because the degrees obtained in their countries of origin are not recognized. But even many of those who speak good Finnish and have studied at local universities complain of similar difficulties, the author explains.

There comes a time when the immigrant has to make a decision: some leave the country, others survive doing jobs below their qualifications – for example in cleaning companies - and a significant number of them choose to start their own business. As a consequence, Finland now also stands out as having many foreign entrepreneurs with a very high level of education compared to their Finnish counterparts and to entrepreneurs in their home countries.

Immigration and entrepreneurship

Christopher Harper’s study is based mainly on an online survey conducted between September 2020 and February 2021 among 178 foreigners who have their own companies. The aim was to answer the following question: What makes an immigrant an entrepreneur in Finland?

The responses obtained allow us to extract some surprising conclusions and are an invitation to the authorities to rethink the suitability of the current educational and labour integration models.

The first surprising finding is that nearly 90 percent of the immigrants surveyed had a university degree, and among them there were even 8 doctors. This presence of university graduates is far higher than the ratio of graduates among Finnish entrepreneurs, which is only 14 percent. The most common degree that Finnish entrepreneurs have is a vocational degree that is held by 36 percent of native entrepreneurs.

When the author is asked about this issue, his answer is conclusive:

“Finnish society is incapable to integrate these highly educated members of the immigrant community. Obviously some of them get jobs, but there is a very large portion that doesn’t get jobs and then they turn to entrepreneurship.”

Harper points out where the core of the problem lies. He explains that prior learning assessment and recognition (PLAR) is truly missing the R when it comes to Finland.

“Definitely, employers do not recognize the titles of many foreigners and the criteria they often use to screen out immigrants is that they have a less than perfect command of the language,” he says.

But it is not just a matter of having studied abroad. As Harper explains in his conclusions, in addition to the missing R, it appears that even if the degree is from a Finnish university, the immigrant indicates challenges in entering the Finnish workforce.

Another major obstacle could be the language. According to the study findings, only approximately 10 percent of foreign business owners were fluent in Finnish when they started a business.

In this context, the inability to enter the labour market has led to a complicated situation, in which some small and micro-enterprises have been founded by immigrant university graduates. And among them, several have been created even by people who have a PhD from Finnish universities.

“This odd phenomenon leads to the conclusion that the job market in Finland is far too rigid to take advantage of this talent pool,” emphasizes the author.

IT sector, the exception

Christopher Harper, who was born in England and immigrated to Finland as a child, explains that he doesn't think this is a matter of racism. In fact, he points out that there are exceptions to this reality. He explains that when hiring, an employer's main interest is how much money employees can earn, regardless of their origin. A good example of a sector where poor command of the Finnish language is not an obstacle is the IT sector, where foreign professionals find work easily.

The researcher, who worked in the past for large companies such as Nokia and Kone, also explains that, in general, the larger the company, the more foreign employees.

According to the study, foreign entrepreneurs in Finland are usually people with higher education, who live in large cities, who have been doing business for more than two years and who have invested their savings to become self-employed. Most of them (around 65 percent) are sole entrepreneurs, but there are also others who employ both Finns and immigrants.

A third of foreign entrepreneurs (more than 30 percent) were not aware of the start-up business facility (Starttirahaa) when they launched their companies.

Despite the initial lack of command of the local language, it would be a mistake to assume that foreign entrepreneurs in Finland only do business in their own communities. According to Harper, "it seems that those with the worst command of the Finnish language do as much business with the native population of Finland as those who speak the language well."