The HEA have put the new Employment Control Framework 2011-2014 as it relates to the third level sector up on their website.  It has some significant revisions, especially concerning the application of insitution employment ceilings to include non-exchequer funded staff and the requirement to receive approval from the HEA for all staff appointments, regardless of funding source.

now encompass all staff employed in the Higher Education sector (including contract staff and staff on secondment from other bodies) who are members of public sector pension schemes, irrespective of whether their posts are funded, in whole or in part, by the Exchequer or from non Exchequer sources.” … “while staff who are not considered to be “core staff” of the institutions (because they are engaged in discretionary activities that are funded from external sources in the short term – whether Exchequer or non-Exchequer) were excluded from the staffing ceilings under the previous ECF, these staff have entitlements to future pension benefits which represent a deferred cost or liability for the Exchequer. As such, these “non-core staff” can no longer be disregarded when it comes to applying overall Government policy on numbers control in the public sector.”

There are two issues with regards to the pension issues.  First, all non-exchequer funding should come with sufficient pension contributions built into the award, so I’m not sure what the issue is.  Second, even if there is an issue we’re talking about deferred pensions on a small number of short-term contracts.  In the case of the vast majority of contract research staff these will not be accessed for thirty plus years.  To stifle getting short term job creation now, and at the same time doing damage to one of the supposed key drivers of the smart economy – the third level sector – over supposed pension liabilities in thirty years time seems ridiculously short sighted.  It is the philosophy of the bean counter.  If we don’t get the economy moving, then we’ll have a much bigger pension issue in thirty years time.

The total number of staff employed in the sector, including all permanent staff (academic, administrative, research, technical, ancillary etc) and all contract staff (academic, administrative, research, technical, ancillary etc) who are members of public sector pension schemes, and irrespective of whether such posts are funded (in whole or in part) by Exchequer funds and/or non-Exchequer funds, will be subject to the annual employment ceilings … The HEA will allocate these employment ceilings across institutions, taking into account the student numbers, staffing levels and other relevant factors in each institution.

I do not understand the logic of including all research and other non-exchequer funded staff in overall institutional ceiling figures.  What that means is that very large research grants from the EU and other bodies could be turned down because an institution is deemed to already have reached its staff quota.  Given that the salary and pension is coming from non-exchequer funds why cap the total number of employees in an institution?

“any proposals to appoint such new contract research staff or to renew such existing contracts must be put in advance to the HEA.”

As someone who runs a research institute where 13 out of my 15 staff are on short term contracts (10 of which run out in the next 11 months; the two non-contract posts are both secondments), I am acutely atuned to anything that is going to make the already very difficult task of raising everyone’s salary every year or indeed enable new staff to start more difficult.  The institute lost 7 staff last year, we will lose more this year.  We are already contributing heavily to the loss of staff in the public sector.  It seems ludicrous to me that every time we try to extend a contract we are going to have to seek permission from the HEA to do so.  The new measure is going to create an enormous amount of unnecessary bureaucratic redtape for government departments and universities and it is going to have all kinds of knock on consequences alia the competitiveness of Irish universities trying to build collaborative arrangements with business, international partners and in recruiting worldclass staff and students.

Frankly, the HEA should not be worrying about the burden of research staff on the pension liabilities thirty years down the line.  It should be worrying about losing a massive amount of research capacity in the university sector as funding lines continue to erode.  Over the past ten years the research capacity and non-exchequer funding of Irish universities has massively improved.  All universities have moved up the world rankings and several worldclass research centres have developed, including NIRSA.  There is a very big danger of reversing all this progress out.  Far from seeking to constraint the pursuit of research funding and contract posts, it should be trying to find imaginative ways to aid attracting and creating such posts.  For a country interested in pursuing a smart economy agenda, this does not seem very smart.  Creating a large new layer of bureaucracy and stifling non-exchequer funded research work seems pretty dumb actually.

Rob Kitchin

Another guest post from Iceland, this time from Huginn Freyr Þorsteinsson.

In the early days of the present financial crisis Iceland became one of the poster children for the crash that seemed inevitable. Some commentators thought Iceland’s problems were an indicator for what would soon be the fate of other countries that had prospered in the days of the economic boom. The question was posed in early January 2009: “What’s the difference between Ireland and Iceland? – One letter and about 6-months!”

The question was valid. Although Ireland did not expand its banking system nearly as much as Iceland did the situation in Ireland was serious enough. Both countries had followed neo-liberal policies in trying to lure investors to the country with deregulation, lowering of taxes and privatization. For this the two respected countries got lauded by neo-liberal economists who stated that the proof was in the pudding – economic growth was staggering in both cases. But what is the situation now one year has gone by since the above question was posed?

I think it is fair to say that the doomsday scenarios put forward in October 2008 for Iceland have not materialized. Also that predictions for other countries such as the Baltic States, Ukraine, Ireland, Spain, Italy and Greece turned out to be wrong because they were too optimistic. The status of these countries is now catching the international media headlines whilst Iceland has somewhat gone out of the spotlight and news that Iceland’s economic contraction was smaller then envisaged, unemployment figures lower, less capital needed to put into the resurrected banks and a huge turnover from a massive trade deficit to trade surplus has not surfaced.

Three major differences separate Ireland and Iceland. One is that we do not have the Euro which is extremely helpful when we need to rely on exports and a trade surplus. The Icelandic krona gives way whilst the crisis in Ireland has little or no impact on the Euro. Once an expensive place of travel, Iceland is now actually a relatively cheap destination, helping the tourist industry staying strong despite diminishing tourism around the world. The same goes for the export industry which benefits greatly from a weakened krona as it gets more kronas for the products exported.

The second difference is that Ireland went for an all-out bank bailout whilst Iceland took deposits and matching important assets (loans to individuals and Icelandic companies etc.) and put it into new banks whilst letting the old banks go into administration. This manoeuvre was implemented through emergency legislation in October 2008 in order to protect the Icelandic economy from collapsing along with its gigantic banks (their size was 8-10 times Iceland’s GDP at the time of collapse). This means that the sovereign did not try to stand behind the big banks but used the opportunity to heavily trim them down which in turn has made Iceland’s external debt many times lower than it was in the months before the crash.

The third difference is the future unforeseen impact of pensions on the tax payers’ money. One thing we do know is that the future number of pensioners in Europe will be considerably higher than today and more money is needed to fund pension schemes. When it comes to calculating the government debt or obligations of the state such numbers are left out but it is quite evident that many states will struggle with meeting pension obligations. Iceland has a well funded pension system and as seen on the picture below will be well off in meeting these demands and will probably not have to rely on tax payer money.

Pension fund assets growing in relation to the size of the economy (OECD Pensions and Markets 2008)

The ratio of OECD pension fund assets to OECD GDP increased from 70.7% in 2005 to 72.5% of GDP in 2006. The largest asset-to-GDP ratio was Iceland’s, at 132.7%.

However, Iceland has become very indebted because of the need to take loans to support its currency, restore the banks, resurrect the Central Bank (which went bankrupt), reimburse depositors in the UK and the Netherlands for the Icesave accounts and tackle a massive government deficit. At the moment the Icelandic government is working with the IMF and the Nordic countries in order to get the economy back on track and hasten the recovery. The IMF is working in close collaboration with a left-wing majority government whose finance minister, Mr. Steingrímur J. Sigfússon, comes from the Left-green Movement. The situation for the IMF is probably quite unique as they are dealing with a crisis that is a result of radical neo-liberal policies as opposed to lack thereof. Traditionally the IMF has thought such policies were medicine for failed economies but now the case is the opposite.

The uniqueness of the Icelandic case might be seen in how multi-dimensional it is. It is a bank crisis, a debt crisis (households and companies), a currency crisis and a tainted reputation. But as events unfold in the world economy Iceland’s difficulties seem to be less and less unique. Other countries seem to be catching up quickly and even possibly have already left us behind.

Huginn Freyr Þorsteinsson is adjunct professor at the University of Akureyri.

IBEC, the employers group, reports that the crisis in company pensions continues, with many defined benefits pension schemes being under-capitalised (see here and here).  Of the 253 employers surveyed 47% indicated that their defined benefit scheme did not comply with the minimum funding standard set by the Pensions Board, and 62% said they had faced difficulties in funding their scheme. Of those schemes that were having difficulties 63% have so far closed the scheme to new entrants.  29% have made a monetary contribution to the scheme to bolster it.  33% have increased employer contributions and 10% more are to do so on 2010. 24% have increased employee contributions.  24% have introduced career averaging for final pension rather than payments being based on final salary.  And 8% have closed their scheme.  At present, the majority of Irish private sector workers do not have an occupational pension.  Whichever way one looks at it company defined benefit schemes are in trouble and the issue needs attention if we are to avoid financial difficulties for workers when they retire, who having paid into a scheme in good faith for many years suddenly find themselves adjusting to a new reality.