Shifting Risk

A company that operates 128 early childhood education centres across New Zealand tried to impose new employment contracts on its staff. The new contract states that hours of work will be between 20 and 40 hours a week, with a guaranteed minimum of only 20 hours.

The company claims that it has had to take this action because a significant percentage of children have not returned to child care following the coronavirus shutdown. It said that when the children return, they will give their existing staff additional hours. However, the contracts were not temporary, so they change the situation so that staff would lose out, rather than the company, if the numbers of children decline in the future.

Although the company backed down, after pressure from the unions and the government, which provides much of their funding, this type of contract is becoming more and more and more common.

According to economic theory, businesses are entitled to profit to compensate them for the risk that they run in starting and operating a business in an uncertain world. That is correct, but in recent years, we have seen more and more businesses shifting the cost of risks of doing business onto their employees, who cannot afford to carry the risk of losing their income. Of course, the business still expect to make the same volume of profits, despite not carrying so much risk. This is dishonest.

In recent years, many businesses have done something similar. The worst example is putting employees on zero-hour contracts, which requires them to be available when the business wants them to work, but with no guaranteed hours. No one can live like that. The practice of using contract employment agencies to provide staff rather than employing them directly is another example because staff can be removed with no cost at any time. This pushes business risk onto poorly-paid employees.