What’s all the fuss over pensions about? Why should you bother reading about retirement benefits, especially when the proposed changes don’t affect current faculty and staff, whose pensions are secure? Surely there are more important concerns in this age of austerity: Aren’t we expecting the campus to announce budget cuts this month? What about lecturers, custodians and parking attendants seeking a living wage, and students faced with rising fees and food insecurity?
Here’s why it matters: Unless we resist, the UC Office of the President is prepared to institute changes to the way faculty are compensated that will accelerate the privatization of the University of California. In effect, UCOP wants to make the remuneration of faculty and staff more and more dependent on the monoculture of “the market,” thereby undermining the partial protection from economic insecurity upon which the intellectual freedom of academic work depends. Although more subtle, the proposed changes are as much an attack on the principles of academic freedom as Wisconsin’s weakening of tenure protection for its university faculty. These are strong claims, I realize, so let me explain.
Pretty much everyone agrees that the only thing wrong with the current retirement plan for UC employees — UC Retirement Plan, or UCRP — is that both the California state legislature and university stopped making payments to it for 20 years — when investment returns were so robust that regular payments seemed unnecessary — until the financial collapse of 2008. Rather than collaborate on a gradual plan to fix the consequence of these suspended payments, however, Gov. Jerry Brown and UC President Janet Napolitano have privately negotiated a deal that places blame for the problem on the structural foundation of UCRP: defined benefits. The agreement is a bad deal, because it will neither significantly reduce the unfunded liability nor yield significant savings for the university. For that reason it ought to be opposed; we should return the proffered $96 million to the state and retain our current system. But we also need to consider more carefully what’s at stake in the attack on “defined benefit” plans such as the UCRP. While there’s been much criticism of Napolitano’s agreement to the PEPRA cap of $117,000 pensionable salary, that’s not the real issue; UCOP has made clear its intention to supplement benefits for higher-earning faculty and staff. The more fundamental interest — made explicit in the FAQs and other documents about the proposed plans — is to shift “risk” to employees. Even before she had appointed her “Retirement Options Task Force,” Napolitano had announced her intention to introduce a full “defined contribution” plan.
The difference between “defined benefits” and “defined contributions” is fairly simple, although the names are confusing. The employer makes “contributions” in both cases (contributions are deferred compensation, where the employee foregoes a higher current salary for future retirement security). In “defined benefits” (DB) plans, the employer invests these contributions, and the risk is lessened by scale; “defined contributions” go directly to the employee to invest privately in IRAs. In DC plans, if you don’t invest wisely, or if the market crashes, your retirement savings are wiped out (as happened to many with DC plans in 2008). The UCRP, by contrast, uses the DB model, described as “golden handcuffs.” Long recognized as the university’s “competitive advantage” in hiring and retaining a dedicated faculty and staff, the UCRP encourages long-term employment because the percentage of pensionable salary is multiplied by years of service. You can more easily dedicate your academic life to long-term projects or to research topics not likely to yield a “commercial application” if you know your retirement benefits are secure.
UCOP defends the shift from DB to DC as “facilitating shared responsibility between UC and employees for individual retirement readiness.” That defense is galling for two reasons. First, the statement suggests that employees have not been sharing responsibility for retirement readiness, despite the obvious fact that employees contribute 7 to 8 percent of their salaries to the UCRP. But what’s almost sinful about UCOP’s moralizing tone is that it entirely ignores the enormous financial risk undertaken by scholars. In order to gain expertise in a discipline, develop an original research project and intern as teachers, graduate students postpone full-time employment for an average of six to 10 years, often taking on debt to pay fees or to supplement inadequate stipends (I remember my elder sister asking me, “Do you know I’ve made $400,000 while you’ve been in graduate school?” That was 25 years ago, and she was only making $50,000 a year). They take on this risk despite the (increasing) scarcity of tenure-track positions. Then, if they are lucky and talented enough to find employment — at the ripe age of 36, the average for assistant professors hired by the university in 2013-14 — they must move to areas such as Berkeley where housing costs are prohibitive. While home ownership has long been an alternative investment strategy for safe retirement, few assistant professors are now able to accumulate the savings that might enable a down payment on a house in or near Berkeley.
It’s clear that UCOP will not realize significant savings by capping defined benefits and paying higher salaries and supplementary contributions to offset the cap. What it would accomplish — and this is why their plan should be opposed — is the erosion of an ecosystem that has allowed research and free inquiry to flourish. Opponents often describe both tenure and defined benefits as obsolete, vestigial privileges. I’d suggest the reverse: The academic “guild” model (long apprenticeship, secure employment and retirement) offers proof that freedom is best protected when workers and thinkers are not subjected to the vagaries of the market, when they’re liberated by long-term investment strategies from the pressures of quick profit and just-in-time production.
Celeste Langan is a professor in the UC Berkeley English Department.