I don't get why technical people who don't want to go in management sign on as permanent employees. Why deal with all that career review nonsense, etc. when as a technical person you have no track anyway?
Except that you don't have job security precisely because you're not going into management. Cost of living raises for 15 years without moving up the ladder (i.e. going into management) make you stick out like a soar thumb. In my experience these are always the first to go because they just look too expensive on any chart.
I'm almost 38 and had my first child not too long ago. Sometimes I surprise myself at feeling tempted to chase the illusion of "stability" at a bigger company. Then I remind myself of all my friends who have been through terrible layoffs and remember that there almost never is such a thing as stability nowadays.
I think a lot of people get the same feeling I do for the same reasons, but then forget the whole "remind yourself" part.
Some companies actually do have career paths of technical people, and most companies will claim to have them. It's hard to tell from bottom rung exactly what track you may or may not have a few steps up.
This isn't always evident from the outside, and it may not even be evident from the inside, until you realize you should be advancing along that non-existent career path.
Most companies do have technical career path. Being a permanent employee not only gives you the benefits (others have listed them), but also lets you work on much more interesting projects (contractors typically work on isolated projects rather than on core systems and algorithms; I know, of course, of exceptions to that but they're rare). It also frees you up of the overhead of finding the next contract.
I know many people who have done contracting and several told me a) the money _is_ very good b) other than the money, it's not worth it (stressful, uninteresting projects, high overhead).
Red Hat has a good technical career path. No need to go into management if you don't want to, and plenty of people on my team in their 40s and 50s still working happily on the "codeface".
The contracting money isn't what is was. When I started contracting in 2000 you could write your own ticket - obscene wages and all the hours you want. Now I'm an employee at the same company, and the contractors make less than I do if you add the bonus. These guys are making about 40% less than I made ten years ago.