In some countries, labour law requires that if an individual has been employed on temporary contracts for a certain amount of time, the employer must offer them a permanent contract (or let them go). They may be reluctant to do so when labour law stipulates they need a reasonable cause to fire employees; however, if a company cannot afford to hold on to people, they can and are let go.
Somehow, different principles seem to apply within universities, where postdocs¹ and other research-funded staff are often held on contract after contract, up to an entire career long. The postdocs at my university want to persuade the university to offer postdocs a permanent contract, but with the understanding that if the money source for their salary runs out, they will be let go; just like employees in industry would. I'm told some universities already apply that principle. It would not increase the de facto job security for postdocs much, but it would open up the option of getting a mortgage for those who expect to stay in the same city for a long time.
Considering that universities could let go of staff if they can show they can no longer afford to hold on to them, why are they so reluctant to offer postdocs a contract that doesn't stipulate an ending date?
NB: to the best of my knowledge, this phenomenon is global; therefore I am interested in answers that are either generic or specific to a particular country
¹By postdoc I mean anyone employed by the university with a role primarily to do research. Formally my employer calls this "research funded staff" but colloquially this group is referred to as postdocs regardless of age.
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