Why We Strike
Waseem Yaqoob
Next Thursday, staff at UK universities will begin a wave of strike action in defence of our pensions. Fourteen days of strikes will roll across 61 of the ‘pre-92’ universities; the other seven are being reballoted by the University and Colleges Union (UCU) as they didn’t meet the 50 per cent turnout threshold imposed by the 2016 Trade Union Act. On days not covered by the strike, we will work to contract.
The Universities Superannuation Scheme (USS) has more than 400,000 members. According to Universities UK (UUK), the employers’ association, USS faces a deficit that requires its transformation from a defined benefit scheme, providing staff with a guaranteed retirement income, into a defined contribution scheme, made up of individual pension funds subject to the vagaries of the stock market. These changes, imposed in the teeth of opposition from union negotiators, will leave everyone who currently pays into USS worse off.
What is proposed is a textbook case of the dismantling of a shared good through financialisation. If our pensions are dependent on investment performance, risks that were once shared will be borne by individual USS members. All estimates (including employers’) are of a reduction in retirement income of between 10 and 40 per cent, with a typical staff member losing between £60,000 and £200,000 over the course of their retirement. Defined benefit pensions are deferred wages, and the proposed reforms are a wage grab – following a real-term decline in staff salaries of 15 to 20 per cent since 2009.
The rationale for the changes is dubious. There is no crisis in USS: the alleged deficit of £7.5 billion is largely fictional, produced by a remarkably opaque and pessimistic valuation – driven by the leadership of Oxford and Cambridge – that is optimistic in only one respect: how much longer staff will live to burden the scheme. The valuation assumes an increase in average life expectancy of 1.5 per cent per year (in practice, increases in longevity are proving lower than expected). The hawkish valuation also relies on an imagined shift in investment strategy away from growth and towards a ‘de-risking’ so radical that it endangers the health of the scheme; union negotiators have described it as ‘reckless prudence’.
All this at a time when UK universities are richer than ever, thanks to fee income. To afford the expensive capital investment they believe is required to attract students – from vanity building projects to overseas campuses – universities are looking to reduce employment costs, whether through wages, staff numbers or pension liabilities. Cambridge’s wage bill has decreased as a percentage of total expenditure by 4.3 per cent since 2009.
The planned offloading of pension liabilities onto staff represents a shift in the nature of universities, from a common educational enterprise to a scheme of profit maximisation directed by senior management (whose own pay is soaring). It is a political choice, not a financial necessity. UK universities are a microcosm of the most inequitable developments in the wider economy. Wealth accumulates at the top, while low pay, insecurity and exploitation is endemic elsewhere. Figures from 2016 showed that 75,000 UK university staff were on highly casualised contracts, and 21,000 on zero hours.
With the pensions dispute, however, the chain of influence may spread outwards from universities. Exchanges between UCU branches and MPs show that the government is taking an interest in the future of all defined benefit schemes. What happens to USS, the second largest pension fund in the UK, is of national importance. At stake are the principles that workers should be paid fairly and that risk should be pooled.
Since winning a major victory on pay in 2006, university staff have increasingly questioned the value of taking industrial action. Academics in particular have preferred to place their hopes in traditional modes of self-governance. Given the deep distaste lecturers have for disrupting their students’ education, this was to be expected. But it seems that many have realised once again that concerted industrial action, despite its hardships and moral dilemmas, may be the only way to prevent the decline of the sector, in the interests of staff and students alike. On a turnout of 58 per cent, 88 per cent of UCU members who voted backed strike action.
The success of the strike will depend to a large extent on how students respond. Jeremiads about the future of the universities depict the students as consumerist monads. But a survey carried out earlier this week reveals that, though students are split on the strike, most of them blame the government, their university or their vice chancellor. Only one in twenty blames the union. Students have expressed solidarity with striking staff while at the same time demanding refunds for their disrupted education. Staff as well as students may have much to learn in figuring out how to make common cause with each other.
Comments
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17 February 2018
at
11:09am
XopherO
says:
I seem to remember that the original decline in what was a very healthy pension fund was originally caused, not by the increased longevity of academics, but because those brave leaders of our universities decided to take a contributions holiday (for the employer, not for the staff!) when the stock market was riding high, deliberately forgetting that what goes up must come down. Yet again the competence of trustees of such funds is brought into question in this increasingly financially corrupt country. Where are the votes of no confidence in essentially greedy and alienated VCs at Senate/Academic Board meetings? I wish the strikers well but don't hold out great hope because so many staff will cross picket lines, and undermine the action in other ways to 'protect their students' but also undoubtedly their own pockets (14 days is 3 weeks pay) - money now, but a bleak outlook for retirement.
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17 February 2018
at
3:09pm
Trish Gellam
says:
@
XopherO
At the University of Reading there was a vote of no confidence in Vice Chancellor David Bell backed by almost 90% of the staff. He refused to resign.
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17 February 2018
at
8:52pm
s.j.marsh
says:
@
XopherO
I've never actually found the full details of this! I have been told that USS employers didn't take a payment holiday by some, but others have claimed they did.
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18 February 2018
at
12:50pm
Michael Edwards
says:
@
XopherO
Correction —minor but serious for most financially-stressed strikers— each day we stike we'll lose 1/365th of a year's pay = 46% of a month's pay. And a lower % after tax. (This is UCL practice, anyway.)
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18 February 2018
at
11:00pm
JamesBaldwin
says:
@
XopherO
The pension fund isn't in poor health - it is in very good health indeed (as you would hope after a huge boom in every asset class over a decade). The "deficit" that UUK talk about is a projected deficit. They have chosen a calculation method that produces a big deficit, in order to justify cuts they want to make.
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19 February 2018
at
2:28pm
XopherO
says:
@
JamesBaldwin
Thanks for that clarification James, but I suppose if it was unclear to me just how devious UUK is in basically creating untruths about the pension fund, I should have known better, such is the state of leadership in HE by fat-cat VCs, whose pensions will continue to be stuffed full of cash! Academics will be deceived if they do not read an analysis as clear and concise as yours. The problem therefore lies in the success of the action. (I was there a long time ago!) It comes down to membership of UCU in each university (critical, and usually not pursued enough even by Head Office), the profile and 'propaganda/information' the union keeps up in the institution (so when the call comes, they are ready), getting members to vote, and then getting them out. You can lose friends. Just 51% of members voted for strike action - well less than 50% of academic staff, probably less than 40%. But Waseem Yaqoob is right - it is of national importance. It is the thin end of the wedge for the remaining schemes.
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20 February 2018
at
7:03pm
sokrates
says:
@
Michael Edwards
In that case, 1/365=46/1200=23/600 or about 1/25. But this seems not to be generally accepted arithmetic.
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20 February 2018
at
7:28pm
sokrates
says:
@
JamesBaldwin
Do they use the 30 year gilt to project investment returns? On p106 of the annual report the investment assumptions don't say anything of the kind. It is true that the expected returns shown there have been falling, and are projected to fall further over the next 17 years. Also true that the discount rate has been falling because both the expected return and gilt yields have been falling, but the supposed "maneuver" - assuming investment returns are no better than gilts - isn't the source of the valuation problem.
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22 February 2018
at
2:31pm
LTK
says:
@
JamesBaldwin
The actuarial rules on funding and the use of gilt yields are the same rules used by all pension schemes; they're nothing to do with UUK. This kind of wishful thinking - "the experts disagree with what I'd like to be be true so they must be wrong or corrupt" - is why we've ended up with such distrust of experts.
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17 February 2018
at
8:52pm
s.j.marsh
says:
A really good article, this! Gets straight to the heart of the issue and characterises it perfectly.
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20 February 2018
at
7:32pm
bidem
says:
Final salary pension schemes have almost disappeared in the private sector. Basically because they are too expensive. It is inevitable that similar public sector schemes will also have to go.
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20 February 2018
at
9:05pm
Waseem Yaqoob
says:
@
bidem
The final salary scheme for university staff was closed in 2011. The USS pension scheme is not funded out of general taxation; it is not a public sector pension fund. Academics do not live out of the public expense, at because most university income comes from tuition fees. Members of the scheme are not just academics, but academic-related staff too, including technicians, librarians and administrators, often on low salaries. That is why USS has 400,000 members. So even if you hadn't got everything else wrong, you would still be missing half the point. The UK university system, if one wants to talk in those terms, is a major asset to the national economy, even though government policy and senior management seem determined to drive it into the ground.
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21 February 2018
at
10:02am
mildly_baffled
says:
Seems like the financial realities that have raped private sector pension provision in the last decade, are finally catching up with academia - using all the same excuses. To be honest, I don't have much sympathy, given the response (or the sad lack of one) to the biggest social engineering experiment since Thatcher, the imposition of student fees. Did not hear too much from the University academic staff during that debate - some might say they cowardly sat on the fence.
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21 February 2018
at
10:39am
Coldish
says:
My capacity for sympathy with the concerns of the university staff is tempered by the fact that even after more than 25 years continuous direct part-time employment by a British university the total pension I receive from that source is a big round zero.
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1 March 2018
at
9:41am
gringo_gus
says:
@
Coldish
I have capacity for sympathy for you, that is very bad. Which university ? And forgive me, but your ire should be addressed to fat-cat VCs, rather than urging on a race to the bottom.
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21 February 2018
at
11:42am
Alessandra
says:
I have a hard time considering the pension fund a 'shared good' when it is based on investments in defense, oil and tobacco companies, companies such as Raytheon, Rio Tinto, Nestle' and British Tobacco, whose appalling corporate behaviour causes pain and suffering around the world. While I support the strike, I am less than convinced that academics are being honest here. The loudest supporters of the strike are also the ones who made a career out of criticising neo-liberalism, the market and whatever other fashionable word describes our economic system, and yet they are eager to benefit from it. Of course it is impossible to call oneself out of the current economic system, but is quite another thing to actively benefit from it. One does not have to enroll in USS, and there are other investment schemes out there. In capitalism, you do vote with your money, and 95% of academics are voting to benefit from the worst corporations out there. Shared maybe, but not a good.
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1 March 2018
at
9:42am
gringo_gus
says:
@
Alessandra
Citations please ?
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22 February 2018
at
11:05am
g.iettogillies
says:
Excellent piece. I would like to stress that it seems to me an attempt by the City to get a cut on the pension fund of dedicated, often overworked grossly underpaid academics. I am a retired academic and I wish all working UK academics success in protecting their hard earned pensions.
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22 February 2018
at
11:41pm
Graucho
says:
Just to rub a little salt in
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23 February 2018
at
11:04am
XopherO
says:
@
Graucho
Well said. They are now acquiring expertise in 'Maxwellising' a pension fund - because ultimately it is a form of theft, to prop up employers who are inept at running their universities despite the windfall from student fees. They long ago lost a real concern for students (now paying clients, though they clearly ignore the 'paying' bit when it suits them) and academics (now wage slaves if they are lucky enough to be on a regular wage). They are probably rubbing their hands at the windfall into university funds from academics' lost pay. In the past, some university bosses have tried to claim that academics only work 250 days a year (ie not weekends), so they could deduct more.
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1 March 2018
at
9:54am
gringo_gus
says:
Well, the strike hasn't turned out how many of the commentators here predicted with the more-progressive-than-thou reasons to oppose it. Students have been incredibly supportive, baking cakes, occupying university VC offices, and sending private messages of support. For me, a great unexpected consequence of the strike has been to realize how much our students like us, and are not simply the passive and grumpy consumers we are led to believe.
Read morehttp://www.bbc.co.uk/news/uk-england-berkshire-36045536
Very much like the Student Unions, the democratic apparatus that allows for staff involvement with university business have become totally powerless. If the VC can ignore a university-wide declartion of his incompetence amid all these problems, what, but a strike, is actually left for the effected workers to do?
Two maneuvers in particular produce the big deficit. One is that they use the 30-yr gilt yield to project the fund's future returns. This is a standard calculation method in the pensions industry, but there are very serious questions about whether it is an appropriate method when the gilt yield has been forced very low by artificial manipulation by the Bank of England (i.e. QE).
The second is that the objective they are measuring the deficit against is the fund paying out all accrued benefits even if no future contributions were made. This might be appropriate in a single-company pension scheme, when the collapse of the company is a realistic possibility, but it isn't sensible for USS which covers all pre-1992 universities. The entire UK higher education sector suddenly collapsing is a ludicrously unlikely scenario.
This is one of the key bits of misinformation offered by UUK so it's essential to reject it. It's useful for them because if there weren't enough money, then it wouldn't matter whose fault it is - "there is no alternative." But it's not true: there's plenty of money in the fund. No matter how rich the fund was, they'd be able to get an accountant to figure out a scenario in which it couldn't pay out, and then say there was a deficit.
The gilt yield is used to discount the fund's future pension payouts back to today's money. It uses gilt yields because they're an approximation to a "risk-free" rate, and a "risk-free" rate is used because it's completely certain that they'll have to pay people their pension. This approach has been used universally in the UK for the last 20 years based on a some highly-influential academic research in the 1990s (eg http://www.actuaries.org.uk/research-and-resources/documents/financial-theory-defined-benefit-pension-schemes), making it particularly ironic and sad to see academics attacking the results of the research as soon as it goes against their narrow self-interest.
The comments on "paying out accrued benefits even if no future contributions are made" are also deeply misguided. Future contributions come with future accrued benefits. Ie next year you and your university will contribute more to the pension scheme but at the same time you'll become entitled to a higher pension. You really can't take future contributions into account unless you also take future accrued benefits into account. I guess it is true that you could try and make future employees pay contributions to cover both their own pension and also your pension, but in theory this is hugely inequitable and in practice this isn't going to happen.
The fundamental problem here is, being extremely simplistic, that we'd like to work for 40 years and then retire for 20 years on a good salary but don't want to make pension contributions of 50%.
Academics should remember that they live at the public expense. We need, at most, about 5% of the university output of graduates. The rest is a self indulgent waste for the benefit of the middle classes.
If you disagree then do what those in private sector employment have to do. Find another job.
You can be sure that when it comes to money, what goes around, most definitely comes around. The root of finacialisation of the excellent public good of University education was student fees. Perhaps if at the time there was more resistance to such from academic staff, they would not be faced with the private sector facts of life. University education is de facto 'private sector' now anyway.
I would be surprised if there is much support from the student body, given the dire future prospects in their own working lives.
Otherwise, the LRB seems to be the homing ground for those who flaunt progressive reasons for ignoring attacks on the pensions of lower paid, women, ethnic minority academics while the old white guys do ok.
http://www.bbc.co.uk/news/education-43157711
Mrs T ushered in a new managerial class whose competence in running organisations came nowhere near to their expertise in designing remuneration packages,
The 'get real' contingent here have been disproved by even further revelations of the stitch-ups Universities UK and Oxbridge organized to impose their Maxwellizing conditions - the caucusing of Oxbridge bursars outside their governing bodies, the misrepresentation of the proportion of universities who wanted the change,the willingness of the majority of institutions to increase employer contributions being overruled.
And, the frequent twittersphere reporting, especially from Cambridge, of 'LRB luvvies' crossing picket lines. I was minded to cancel my sub, but then realized it was the authors of the impenetrable 'catlit pages' which I have learned to tear out anyway. Yes, David Runciman is alleged to be one of these. If true, he should have gone on strike, and used the time to do something completely unconnected to his work, like a creative writing course.