28 February 2018

In defence of the university strikes

By Tzvetan Moev

For a week now all of my lectures have been cancelled, as my professors are on strike. Despite the fact that I may graduate with a £50,000 student debt, I will probably not be refunded for the missed classes. So, are my lecturers justified in striking?

On the January 22 the University and College Union voted with an overwhelming majority of 88 per cent in support of an industrial action in 61 universities across the UK, including Oxford, Cambridge, Imperial and UCL. The vote was held in response to proposed changes by the employers’ association Universities UK (UUK) to the pension scheme Universities Superannuation Scheme (USS) that covers most of the academic and senior administrative staff in pre-92 universities.

USS is a Defined-Benefit scheme meaning that members’ pensions are based on their salary. It is the largest private pension scheme in the UK with over £50bn under its management. Importantly, it is not a government-backed scheme, meaning that it is not funded through taxpayers’ money. In a case of default, the government cannot guarantee its members’ pensions.

UUK claims that in recent years the deficit of the USS has increased considerably to £6.1bn in 2017 which led to a higher risk of default. Moreover, other estimates of the deficit suggested that it is as big as £17.5bn. By law the deficit of USS should be reduced to avoid default. So, UUK has suggested reforming the scheme to a Defined Contribution model, under which pensions depend on the stock market. University and College Union has rejected not only the proposed changes to the USS but also UUK’s estimations of the deficit.

The key question in the dispute, therefore, is whether the deficit of the USS is real. To account for the risk of a default, different models for estimating the deficit make different assumptions. Small changes in which may have huge impact on the final figure. The current UUS model makes some very drastic assumptions, most importantly the possibility that all universities go bankrupt at the same time. Such an assumption is clearly unreasonable, given that the government would likely intervene to avoid such a disastrous scenario.

Given that in the history of USS there has not been any pre-92 university bankruptcy, it is more realistic to estimate the deficit with a model assuming that only one university goes bankrupt. This assumption also seems more reasonable, because even university employers like the Vice Chancellor of Warwick claimed that he was ‘mystified by the current USS’ assumptions. If everything else is held constant in the USS model and the government does not intervene, research has estimated a 60 per cent chance for a surplus to USS even in the case of bankruptcy of a big Russell group university. Under a model with these assumptions, USS seems like a sustainable scheme.

However, even if these assumptions are rejected, there are further reasons why university staff are justified in striking. For one thing, there is an overwhelming support from students (see Figure 1) More than 60 per cent support the strike and a half blame the employers, despite the fact that most undergraduates pay the maximum tuition fee of £9,250 and lose classes as a result of the strike. In a recent speech Theresa May acknowledged the funding problems in higher education and launched a review of university funding. Perhaps lecturers are simply taking advantage of the general discontent with higher education. However, in any case students’ support provides them with more legitimacy to strike.

Figure 1. Results from a YouGov poll asking students about their attitudes towards the university strike

Moreover, if accepted, the changes in USS may affect the supply of lecturers. When talented students decide whether to embark on an academic career or join the private sector, they are aware that they will probably earn more in the private sector. However, the promise of a high pension has acted as a magnet for attracting young academics. Under the changes proposed by UUK it has been estimated that a lecturer starting work now is set to lose £208,000 in their retirement, or £9,600 each year.

But working in academia has other costs for young people as well. Since 2009, real wages in academia have fallen between 15 per cent and 20 per cent. Moreover, in recent years it has become increasingly difficult for young academics to find a permanent job. Even respected Russell Group institutions like Oxford and Warwick have more than 72 per cent of their academic staff on fixed-term or atypical contracts. UWE’s Vice Chancellor has claimed that as a result of these developments young academics face many obstacles like being unable to apply for a mortgage.

Currently, higher education in the UK may be expensive but British universities are thriving in global rankings. Nearly 30 of the global top 200 universities are located in the UK. If the changes to USS and recent developments in higher education like the increase in insecurity disincentivise talented students from pursuing academic careers, the global competiveness of UK universities may be severely damaged.

Overall, lecturers are justified in striking. While the strike may cause some inconveniences for students, UUK’s argument for reforming USS is flawed. Given that USS is sustainable (for now) and that changes in the USS may severely affect the quality of higher education, the defined-benefit element of USS should be retained.

Tzvetan Moev is an economic research intern at the Centre for Policy Studies.