Executives like to work with people that they "like", so its frequently people who went to similar schools, have a similar sense of humor, don't say stupid shit etc. Even if these people are totally ineffective and have no skills, they will keep getting hired. Then, they make use of the new labor markets, where you can just outsource everything and hire consultants/contractors to do the actual implementation.
If the project succeeds, the hired person is a star and gets showered with money, poached by other firms where they try to replicate a similar, completely short sighted way of building business value.
If the project fail, blame the contractors get new ones.
Benefits are not worth 2-3x the pay. I find myself being a contractor due to the better pay.
- Contractors don't always get the best projects. Often the coolest, most strategic projects go to employees. Of course, if no one internally is qualified, contractors then get the best projects.
- When cuts happen, contractors are at the front of the line, and when cuts need to go deeper, employees then are at risk.
- It is a pain to collect. You are often not the primary contractors, there is usually a pass-thru company that is well-connected and gets the receivables and then pass them onto you. Sometimes they delay payments 45 days. Sometimes 60 days. I've had some months paid 4 months late. On rare occasions you never get paid.
- You pay the employer payroll tax if you are in the US and on 1099 (on W2 you only pay half the payroll tax).
- Benefits you purchase are often not the best benefits. The benefits you would get at a large company are often well negotiated and much better and much cheaper than what you purchase a la carte.
Obviously for a contractor premium high enough, none of the above really matters. But contract work isnt worth it, for say, a 40% premium IMHO, especially with a family. At higher premiums (250%, 300%) it can make sense assuming you like what you will be doing.
Until we can show that there is something more effective (and possibly transparent) I fear we are doomed to continue repeating this cycle.