> In most of the places I've worked where there are short-term contracts before full-time hiring, the employer has a far better idea of the skills and quality of the candidate.

At the place I work we offer paid internships to college students who haven't graduated yet. By the end of a summers' worth of work, we have a really good idea as to which interns we would like to hire full time, and we give them an offer on the spot (contingent on graduation), no interview needed.