In SF, it seems most freelancers are in it for the lifestyle benefits, rather than the pay. When you factor in the lack of vacation time, no benefits, often worse career development and networking vs. working at a proper tech company (one that hires good people, pays well, encourages learning/skill development) it seems a losing proposition. But then, this assumes you have the right kind of companies around, which most people don't.
In London it's the reverse. Anybody who's any good at their job and has a few years of experience under their belt, would be crazy not to give contracting a try.
You make almost twice as much as an employee doing the same job if you're full time, or you can choose to earn the same but take months-long breaks regularly instead. If you like variety or get bored quickly, it also allows you to justify switching jobs without anybody raising eyebrows on the short stints in your resume, because hey you're a consultant.
The downside is worse career/skills development if you're not careful (you need to keep up and go to lots of meetups), you tend to get hired for the same jobs as an expert and not ever move up the management ladder, also some of the best companies and top positions won't be available to you as an outsider (big tech names, CTO roles, early stage startups offering equity over pay)
I always find it instructive to look at how the economics of an employer/client align with the economics of the contractor.
Example: at mass-market product development/distribution companies (Google, Apple, etc.), the big money will be made on a great product launch. In that kind of situation, you need to find a way to get some equity or some piece of the big launch. This -- big companies launching scaled platforms to lots of people -- is how the biggest fortunes are made in tech. I find these places aren't great for high-$ contracting because the economic incentives are so misaligned, all the way up to the CEO.
If, on the other hand, the business is some sort of intermediary, like a realtor / ad agency / investment bank, or uses an agency model (lots of cash comp, little equity value, big cash bonuses but nobody's building anything with stock/ownership) that might be a better place for a contractor because they have the cash to pay, but, I have to question whether that's going to make for a satisfying career.
Surprisingly, the older I get, the more I realize how much (1) the salary-optimization game (vs. being part of a big company/product/launch) is a sucker bet in tech and (2) so much of life is about relationships, network, and reputation. I guess it's different from person to person, but, still, I've done contracting and I'm not going back.
I've lived a few places on the east coast basically, all lower cost of living. But I've been freelancing with folks in SF and Chicago, so the differential is in my favor.
I started freelancing in grad school, so I've pretty much always been moonlighting and choosing my own hours (in addition to the "day job" of grad school).
In SF, it seems most freelancers are in it for the lifestyle benefits, rather than the pay. When you factor in the lack of vacation time, no benefits, often worse career development and networking vs. working at a proper tech company (one that hires good people, pays well, encourages learning/skill development) it seems a losing proposition. But then, this assumes you have the right kind of companies around, which most people don't.