That's exactly what a company is doing when it fires its workers and re-hires them as contractors.
Permatemping, which is the name of this practice, indicates that the economy is in an unhealthy and unnatural state. Healthy economies do not require cost dodges, risk offloading, and/or other similar mechanisms for labor markets.
Permatemping tends to decouple the work ethic as well. Europe’s rampant use of contractors combined with decoupled health care systems have reduced the motivation to work. In the US, it acts as a coping mechanism for a stagnant economy.