Prison Economics

Prison Labor and Economy

Introduction

The U.S. prison population, already the largest in the world, grew by 3.4% annually between 1980 and 2004, leaving corrections facilities at 40 percent over capacity. Inmates in federal, state, local and other prisons totaled nearly 2.3 million at the end of last year. According to a recent study, there are more people behind bars in the United States than in any other country.

Over 80,000 of these prisoners hold traditional jobs working for government or private companies. The private sector programs, which exist in 36 states has doubled in size since 1995.

Benefits of Prison Labor

Prison labor has two main benefits. First, it reduces the likelihood inmates would lapse into previous behaviors once released from prison, thereby reducing crime and lowering prison costs. Second, if done right, it produces "profits" which can be used to offset the taxpayer-financed costs of incarcerating prisoners. Studies have shown that inmates who work in prison industries or had vocational training have better outcomes when they are released from prison. Research suggests that the failure of ex-offenders to maintain employment may contribute to high lapse rates. Further, studies have found that offenders who receive training and work experience while in prison had fewer conduct problems and were less likely to be arrested the first year after release.

Opposition

In spite of the significant advantages of prison labor to both society and inmates, there are two main factors, which motivate its opposition. The first concern is that making prisoners work is exploitative and second, the fear that it will displace civilian business and labor. Both concerns stimulated the initial reforms put in place on prison labor and were the driving forces, which provoked legislative efforts by Congress to restrict it today.

Federal Prison Industries, Inc.

Federal prison labor in the United States has been in existence since the 1800's when inmates worked for private companies without pay. After hundreds died on the job due to hazardous work conditions, unions and prison reformers demanded a halt to the practice.

In 1934, Congress established the Federal Prison Industries, Inc. (FPI) and placed it under control of the Department of Justice's Bureau of Prisons. FPI's purpose was to serve as a means of managing, training, and rehabilitating inmates by allowing prisoners to work and build job skills. Ideally, these job initiatives would enable them to pursue productive lives after returning to society upon their release.

Federal Prison Industries capitalized on the fact that inmates are a captive audience and a source of considerably cheap labor; wages ranging from as little as 23 cents an hour to $7 an hour. Because of this, FPI was able to provide inexpensive labor to different industries in the production of goods for government firms.

Monopoly

Historically, FPI was a "mandatory source" for the federal government. Legislation required ''FPI to operate on the state-use principle, selling the goods that it produces only to federal departments and agencies. Sale to the public in competition with private enterprise is prohibited. Federal departments and agencies must purchase FPI products to meet their requirements as long as FPI's prices are competitive." Since its inception, the requirement has enabled FPI to be the sole source for more than a half billion dollars in federal contracting opportunities. Regardless of whether or not other businesses could better supply the government in terms of quality, time production, or price; FPI held the power to determine whether its products and distribution tables met federal agencies needs vice the buying agency.

Unemployment

Until 2002, FPI primarily served two industries in Michigan, those being the production and manufacturing of automotive parts and furniture. During that year, its presence in those industries grew by nearly 250%. FPI's exclusion from competitive bidding, caused hundreds of jobs to be taken away from smaller companies and being given to inmates in federal prisons. Michigan businesses could not fairly compete in that type of market and were forced to cut jobs or lay off workers indefinitely. Between 2001 and 2004, Michigan lost over 175,000 manufacturing jobs, almost a quarter of its manufacturing job base.

Series Id: SMS2600000300000001Seasonally AdjustedState: MichiganArea: StatewideSupersector: ManufacturingIndustry: ManufacturingData Type: All Employees, In Thousands

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

2001 849.4 854.8 846.3 839.0 830.8 824.9 814.1 808.1 804.9 793.3 785.6 783.3

2002 762.2 772.2 767.6 763.3 761.2 761.1 759.6 758.6 755.3 755.1 753.2 749.9

2003 738.9 733.7 730.0 718.7 720.8 720.6 690.1 712.3 709.8 706.5 707.7 706.0

2004 705.0 702.5 702.5 704.2 702.2 695.6 676.3 696.9 695.7 693.4 685.3 690.4

Profits

Federal Prison Industries, Inc., intent was to rehabilitate prisoners, not make a profit from it in doing so. Profits generated from its manufacturing endeavors were to be floated back into the institution. Monies received were "deposited in an account with the U.S. Treasury and used: (1) as operating capital; (2) in the lease purchase, acquisition, repair, alteration, erection, and maintenance of industrial buildings and equipment; (3) in the vocational training for inmates; and (4) paying compensation to inmates employed in the industry."

Over a period of several years, FPI generated sales in excess of $500 million. Of that, office furniture averaged 28% of those revenues. Michigan operates a number of office furniture manufacturers throughout the State, including Steelcase Furniture in Grand Rapids, which employs 18,000 people worldwide. In 1998, FPI outsold Steelcase in sales to the federal government.

Confrontation

In 1996, U.S. Representative, Peter Hoekstra (R-MI) confronted FPI head on concerning their efforts to expand their manufacturing industries in Michigan. He stated "FPI's proposal to increase sales to $80 million over