For those unaware, these rules are pervasive in the US corporate world, and stem directly from Vizcaino v. Microsoft in 1996. See:
https://en.wikipedia.org/wiki/Permatemp
Effectively the fact that an employer treats a temporary employee "the same" as a regular one (i.e. by granting them the same perks) is construed by courts as evidence that they are not temporary.
So, if a company wants to hire temp/contractor employees, they just can't do this. It's not a "caste" thing, it's not about deliberate discrimination, it's not about keeping wages low or reducing overhead, and it's absolutely not unique to Google.
Blame the courts, basically. It was a terrible decision, for exactly this reason. Its effect is directly contra to its intent.
> If you worked with a TVC, you'd get training that felt like you were learning how to own a House Elf: "Remember, never give them clothing or they'll be free! And report them if they ever claim to work for Google."
Yes! That's exactly what happens. And it did, to Microsoft, and it was extremely expensive. So no one wants to see the same thing happen to them.