Yea - generally two-tiered employment systems do that. The reason companies hire skilled labour is because the skill more than makes up for the cost. Modern America is in love with the idea that replaceable contractors are every bit as effective as full time employees. Once upon the time this was more than correct when contractors tended to be (mostly) highly skilled folks that would swoop in for critical problem solving, however, it being seen as a lucrative field and then a way to dodge taxes and benefits has watered it down significantly.
Contractors aren't, by definition, any better or worse than full time employees. But when the going gets rough and the gruel is thin the good contractors will all immediately jump ship because, well, they're contractors - that will reinforce the concentration of lower skilled employees at your company and hurt overall morale.
Lastly, treating your coworkers like dirt will get them to give you the bare minimum to avoid being laid off and, if they're contractors anyways, that might not be any real threat - they can move back into the video game job market with the biggest most legendary game studio ever on their resume.
