Its a bit more complex than that. Heres a decent discussion on the breakdown...

http://discuss.fogcreek.com/joelonsoftware3/default.asp?cmd=...

(In short theres a lot of other costs and considerations that have to go into your rate as a contractor.)

An employee with a 100k salary costs something like 200k to the employer. Contractors also expect a bit of a premium due to getting sporadic work, if they didn't get a premium they'd opt for stable work instead. In exchange for this premium you get someone you can stop paying the second you don't need them, and someone who presumably doesn't need training. A salaried employee worth 100k salary should expect somewhere around $100/hr contracting. But the average should be higher yet, because the average contracting job requires more experience than the average salaried job.

Contractors can't work full-time hours.

Contractors are losing work hours by searching for clients, because you never want to end up with your queue empty. So you have to go to lots of meetings and invest in marketing yourself too. And in case plenty of clients are available, just filtering through them is a chore.

Then contractors also work on multiple things at once. At least many of them do, because that way you're minimizing the risk of returning home with zero earnings for the month in progress (we are talking about contractors earning $74 per hour that can't afford to lose much). Some clients are simply going to walk away and you're going to be left without payment, so such a strategy makes sense. But working on multiple things at once means you're constantly doing context-switching.

I think it is safe to assume that contractors are working 5-6 billable hours per day and not more.

That is not quite how contracting math works out, though. You have to charge significantly more to account for just the direct costs of your employment (such as payroll tax, half of which is salary that every employee has but is unaware of) and the benefits package. Basically, you get to pay your own fully loaded costs. $74 an hour at 40 hour weeks gets you a package similar to that enjoyed by an salaried engineer at $80k to $90k or so.

You also tend to charge more than even that calculation suggests, because you're responsible for downtime, overhead in getting new gigs between clients, credit risk, yadda yadda. The upshot is that you'd probably have a contracting rate in the low three figures. (They do, of course, go up from there.)

FWIW I have been both a contractor and a full time employee a few times in the past 5 years and from what I have learned/been told, the general rule is if you make 74k, you should ask for 74/hr to be a contractor due to higher taxes, less job security, no benefits, etc. Obviously this is a pretty sweet deal as the paychecks are bigger, but your expenses are higher and eventually the threat of a changing economy taking your job mean you need to save some extra from that.

74 is likely the take home rate of the contractor. I bill out at more than double that - but I don't take home $74/hour.

Its a fucked up situation for many contractors; they are the ones doing al lthe work, and are typically billed out at 3 times what they make. The employers will say "we have to cover costs like payroll and benefits" and then turn around and charge the employee many hundreds of dollars for the benefits package (mine is 1200/month to cover my whole family.)