Factories Behind Bars

Crime | Policy Reports

No. 206
Sunday, September 01, 1996
by Morgan O. Reynolds

Restricting Work by Prisoners

Many artisans and businesses in the outside world bitterly criticized enterprises that used prisoners, whether operated by prison officials themselves or by private businesses, because of the competition the prison products created. Allied with prison reformers, these interest groups eventually succeeded in many cases in obtaining restrictive legislation against what they regarded as unfair low-wage competition. Prison wardens, fearing a loss of decision-making power and the new task of supervising unproductive and idle prisoners, vigorously opposed new restrictions. Ironically, prison workshops generally had a hard time competing with private enterprise. Nevertheless, because it involved convicted felons and because questions were sometimes raised about the terms on which prisons awarded contracts to entrepreneurs, the "prison industry had certain attributes which made it a convenient scapegoat for the troubles of workingmen."

Some mistreatment of convicts by private employers doubtless occurred. Yet there is no study documenting that standards of treatment by private employers differed from those of prison officials. Gov. Peter Turney of Tennessee called the lease system "cruel in the extreme," but it was not clear whether he was concerned about the well-being of convicts or his own political well-being in appealing for the votes of free laborers. Deplorable conditions in some 19th-century prisons are documented, to be sure. Yet the state, not private employers, held ultimate responsibility for prison conditions.

Complaints that the prisons were not reforming prisoners or that the prisoner work camps were a threat to the safety of people living nearby often coincided with local resentment because work done by the convicts allegedly eliminated work for local residents or because private contractors diverted business from local merchants. A Galveston (Texas) Daily News reporter in 1879 pointed out that there had been no public outrage regarding treatment of prisoners as long as local businesses supplied the camp with needed goods. But when the local contractor began buying supplies outside the area, local citizens became upset and began complaining about abuse of prisoners.

State Action

The combination of complaints about competition from prison-made products, allegations of abuse of working prisoners and concerns about the security of citizens created mounting political pressures in many states to do something about all three. Under such pressures, for example, the New York Legislature in 1842 banned even the transfer of new skills to inmates, declaring that "no convict shall...be permitted to work...at any other mechanical trade than that which...such convict had learned and practiced previous to his conviction." By 1844 both Auburn and Sing Sing were running deficits under the impact of the restrictive statutes. The idea of the self-supporting penitentiary was being undermined. By 1855 the expenses of the penal system exceeded earnings by over $325,000, partly because prison industry efforts to avoid competitive impacts brought financial ruin through poorly chosen industries.

In 1887 the New York Legislature passed the even more restrictive Yates law, which abolished all labor contracts and all manufacturing using "motive-power machinery," limiting prison industries to handicrafts and distribution to in-state only. New Jersey, Ohio and Illinois abolished contracts in the early 1880s, too.44 Beginning in 1883, Pennsylvania passed a series of restrictive laws that achieved the nearly complete extinction of private prison industry in that state by 1897.

Between the 1890s and the 1920s a number of legislatures enacted laws to prohibit the sale of convict-made goods within their states. Many, like New York, adopted the public-use or state-use system, which permitted convicts to manufacture goods for sale to state government agencies only - a very limited market. The opportunities to use prisoner labor continued to dwindle during the first three decades of the 20th century, and during the Great Depression 33 states passed laws prohibiting the sale of convict-made goods on the open market.

Case Study: Tennessee. During the 1870s and 1880s prison reformers and labor leaders stepped up their opposition to the lease system. The Tennessee legislature conducted numerous inquiries and the majority reports always found the system satisfactory while a minority condemned it. Gov. James D. Porter in 1877 remarked, "The present system of employing convict labor is wrong, but I am not certain that the general sentiment of the people of Tennessee is not in favor of it." He complained about the escapes involved in subleasing convicts to farmers and railroads. His successor, Gov. William B. Bates, also opposed the lease system but felt that economic necessity required its continuance.

In 1891 non-convict miners in east Tennessee stormed the branch prisons and during a three-day riot freed more than 400 convict workers before order was restored. The mining company capitulated, rehired union miners and halted the use of convicts. In 1892 all four gubernatorial candidates promised to abolish the lease system. By 1897 the legislature had confined leasing to those firms that would operate factories within state prison facilities. Gov. Turney claimed that a return to the old leasing system would be "cruel in the extreme." He asserted that the state "really made no money, but rather lost, by leasing convicts on account of riots, outbreaks, and invasions" [by organized labor, not prisoners!]. By the early 20th century, all forms of convict leasing had ended in Tennessee, largely because of the so-called progressive movement and rising sympathy with labor, especially organized labor.

Tennessee law still requires that convicts "be kept at labor when in sufficient health" within the prison. Outside employment is permitted only under government direction on state-owned or -leased land, except for about 50 prisoners in a work release program that involves community service on the property of nonprofit agencies like Goodwill Industries. Essentially, no employment is allowed in the productive voluntary sector, and government agencies are monopoly employers of convict labor as well as exclusive buyers of convict-produced goods and services.

Case Study: Texas. The Texas lease system ended after a concerted attack by reform-minded persons. The most important reformers were the chaplain of the Huntsville unit, the Rev. Jake Hodges, and a crusading young reporter for the San Antonio Express, George W. Briggs. Hodges had for years interfered in disciplinary actions, especially in instances of corporal punishment. Hodges found a sympathetic ear in journalist Briggs, only two years out of school, whose series of articles was published over a span of five weeks in December 1908 and January 1909. In an era of progressive journalism devoted to exposing maladministration, the biggest so-called revelation was that "the system was geared almost exclusively to making money, with very little effort expended to reform prisoners." The series triggered enough political controversy to induce a skeptical governor to ask that legislative leaders establish a committee to investigate the prison system.

The committee's findings led to a new prison law that abolished "the system of leasing and hiring out of prisoners." The evidence consisted mostly of unverified allegations of horrific abuse by profit-driven entrepreneurs, charges embraced by those who believed that rapacious capitalists systematically abused and exploited their workers. Witnesses offered little support for their charges and participants abandoned leasing without considering improvements to the state system of bonding, inspecting and monitoring private contractors. By 1923 not a single convict was leased to the private sector.

The movement to end the Texas lease system was bolstered by the discovery of an immense oil field at Spindletop, near Beaumont, Texas, on January 10, 1901. Spindletop filled the state government's coffers and allowed it to subsidize the prison system. The taxes paid by the new energy industry made it far less urgent for prisons to pay their own way. Some reformers even argued that the taxpayers would not suffer because if private contractors made profits on convict farm labor, state industries and farms could too. They ignored the obvious differences in incentives between state bureaucrats and entrepreneurs, not to mention centuries of experience with government's profligacy.

Federal Restrictions

The federal prison system of today had its origins in objections to the leasing of prisoners. For years, federal prisoners had been kept in state prisons at federal expense. But in 1887, Congress outlawed the leasing of federal convicts to farmers and entrepreneurs. This action came at a time when many states still depended heavily on the revenue from prisoner leasing, so some state penitentiaries refused to accept federal prisoners after 1887. As a result, Congress voted in 1891 to establish a separate federal prison system . Still, the major impact of federal action on state use of prisoners did not come until 1929.

Restrictions on Interstate Commerce. From 1929 onward, a series of federal laws limiting shipment of prison-made goods made it increasingly difficult to provide productive employment for prisoners.
  • The Hawes-Cooper Act (1929) mandated that prison-made goods transported from one state to another be subject to the laws of the destination state. The effect was to permit a state to ban the sale of all prisoner-made goods, whether made outside or within the state. Hawes-Cooper went into effect in 1934 and affected only states that banned the sale of prisoner-made goods.
  • The Ashurst-Sumners Act (1935) made shipping prisoner-made goods to a state where state law prohibited the receipt, possession, sale or use of such goods a federal offense. Although the act strengthened Hawes-Cooper restrictions on interstate shipment of convict-made goods, protectionist businesses and unions were unsatisfied because the act relied on the states to ban such commerce.
  • The Sumners-Ashurst Act (1940) made it a federal crime to knowingly transport convict-made goods in interstate commerce for private use, regardless of laws in the states.
Restrictions on Federal Procurement. In addition to restricting the shipment of goods made by state prisoners, both Congress and the president placed restrictions on federal contracts and purchases.
  • The Walsh-Healy Act (1936) banned convict labor on federal procurement contracts in the "manufacture...production or furnishing of any...materials, supplies, articles or equipment used in government contracts where the amount thereof exceeds $10,000."
  • Executive Order 11755, effective January 1, 1973, restricted the purchase of inmate-made goods by the federal government.55
As a result of restrictions by the federal and state governments, "the original conception of the penitentiary was thus turned on its head," Andrew Peyton Thomas, a young assistant attorney general in Arizona, said recently. "Prison labor, once viewed as indispensable for restoring a healthy relationship between the criminal and society, was made literally a federal offense."56 The irony is that "whether their preferred penal philosophy was rehabilitation, retribution or deterrence, virtually all of the founders of America's prisons believed in the values of prison labor."57

Wartime Relaxation of Restrictions. During World War II, federal prohibitions on inmate labor were temporarily relaxed, prison industries produced much-needed war materiel and prison morale reportedly rose. Some prisons again became self-supporting and ran surpluses. But the federal government reimposed the restrictions after the war, paying no heed to the prosperity earned through prison self-sufficiency and the habilitative value of work for prisoners themselves.

Relaxation of Restrictions under the PIE Program. In 1979, Congress relaxed some of the strictures on prison labor when it passed the Justice System Improvement Act or Percy Amendment, named after then-U.S. Sen. Charles Percy (R-IL). The Percy Amendment permits waivers of the Sumners-Ashurst and Walsh-Healy restrictions on the interstate sale of prison-made goods and sale to the federal government provided that:
  • Prisoners are paid the "prevailing" or comparable wage (sometimes union scale);
  • Local labor union officials are consulted and approve;
  • Officials find that local non-convict labor is unaffected; and
  • Goods produced are in an industry with no local unemployment.
The Percy Amendment created the Private Sector/Prison Industry Enhancement Certification program (PS/PIEC, better known as the PIE program), a first step in allowing private companies to employ prison labor, since most business markets cross state lines.

Work for Prisoners Today

Federal and state officials as well as private prison reform groups have spent several years exploring ways to increase the number of prisoners who work. This renewed interest in prison labor stems from the tremendous increases in the prisoner population, the diminished belief that prisons can reform prisoners and an American business community unafraid of competition from labor-intensive products best suited to prisons - and typically produced offshore. Progress has been slow, both because of the PIE program's many constraints and because increasing work for convicts has not had a high priority with either government officials or private businessmen.

Operating under the Federal PIE Program. Approved PIE programs directly involve private entrepreneurs in prison-based joint ventures. Since 1979 the PIE program has certified 37 jurisdictions and generated gross earnings for convicts of $63 million, including room and board payments of $13 million. At the end of the first quarter of 1996, 1,944 prisoners were employed and earnings were at an annual rate of $13 million, with about half of earnings going toward family support, victim restitution, taxes and incarceration costs. These modest results indicate that the Percy restrictions make it difficult to create useful jobs.60 [ See the sidebar on Private-Public Ventures in Prisons .]

The Percy legislation is "quite definite on the subject of wages: inmates in certified projects must receive wages comparable to those paid for similar work in the area in which the project is located. The legislative history accompanying the bill makes it clear that Congress saw comparable wages as the best compromise among competing positions."61 In a bow toward regulatory freedom, fringe benefits and employment taxes need not be identical.

State Movement toward Work for Prisoners. In 1990 California voters rejected a $450 million bond issue to fund prison construction but approved a change in the state's constitution to allow operation of private-sector prison industries when assured by the governor that the jobs would not result in the layoff of civilian workers. In 1994 Oregon voters overwhelmingly approved a constitutional amendment to put 100 percent of inmates to work. The Enterprise Prison Institute, headed by prison consultant Knut A. Rostad, promotes and studies corporate involvement in prison work programs. Its board includes Edwin Meese, former U. S. Attorney General, and Rep. Bill McCollum, chairman of the House Judiciary Subcommittee on Crime. A survey of prison officials who manage correctional industries in 25 states found that they believe inmate work programs should be increased so that between 18 and 30 percent of prisoners do full-time work.62 The Correctional Industries Association says that by the year 2000, 30 percent of inmates will work, up from about 11 percent today, and produce $8.9 billion in sales, up from only $1.3 billion.

Many states are moving toward private-sector jobs for prisoners, but slowly. South Carolina, the leading state in private employment of prisoners, has 325 in the PIE program. California is second with 274, Washington has 201 and Nevada 198.63 In Texas, the legislature has repealed the state ban on pay for prisoners64 and authorized the Department of Criminal Justice to contract with state agencies, local governments and private enterprise for the use of inmate labor, but only 134 prisoners have been employed.

The Texas state comptroller, John Sharp, has suggested a goal for the year 2000 of 6,000 Texas prisoners employed in joint ventures. Yet most goals for private employment of prisoners are very modest. For example, at the annual meeting of the American Correctional Association in August 1996 in Memphis, Tenn., prison industry officials expressed hope that 3,000 prisoners would be employed in the PIE program nationwide by 2000.

To view figure Private-Pubic Ventures in Prisons click here.

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