Can I ask what location this is? It's vastly different to my experience of the contracting environment in the UK.
We also still have a very very strong consultant labor force making 2-3x what W2 full-time employees can pull in. These consultants generally work through smaller consulting firms that take smaller cuts for the placement/handling billing and invoicing.
Perm - Mid level benefits + Pay (maybe options in a startup)
Contractor - Individual with their own Ltd company, pays less tax and much higher take home pay but without any benefits.
Consultant - On-site via a supplier on a framework of some kind, however, often a permanent employee of the supplier with the supplier cashing in the margin.
At least 50% of the tech workforce in companies I work with or where peers are at in London are made up of contractors, especially in Banking.
It's also my experience that you get what you pay for, contractors in the whole tend to have a much wider breadth of knowledge from various sectors and hit the ground running whereas I don't tend to see the same appetite from Permanent employees (in most cases!).