Academic journal article American Economist

Prison Labor Effects on the Unskilled Labor Market

Academic journal article American Economist

Prison Labor Effects on the Unskilled Labor Market

Article excerpt

I. Introduction

The prison population has increased nearly five-fold since 1970--over eight percent per year--from 2 in 1,000 adults in 1970 to 9 in 1,000 adults in 1998. This has led to an escalating tax burden and a significant opportunity cost from "warehousing" over 1.9 million inmates. Employing idle inmates "in factories with fences" is getting renewed attention in Congress and state legislatures to offset the expense, to more fully develop and use human capital, and to increase the nation's productivity.

Unfortunately, the impact of prison labor on non-prison labor has been debated over the years based solely on anecdotal evidence. Proponents have touted the social benefits of decreased (net) cost for prisons, improved behavior in prison, the potential for lower recidivism, and rehabilitation through development of work and social skills. Opponents of prison labor from the beginning have pointed out the private costs of lost jobs and lost sales of industries outside the prison.

This paper uses an immigration model and established estimates of elasticities of supply and demand to estimate the labor market implications of prison labor. The prison labor impact estimates provide the first empirical evidence of the impact of prison labor on non-prison labor employment and wage rate. Sections I and II provide discussions of the historical and current contexts, respectively. Sections III and IV include discussions of the methodology and results. Section V includes conclusions and directions for additional research.

II. Historical and Legislative Perspective

Prison labor was designed to "offset the cost of incarceration" in the American penal system. New-gate prison, opened in New York City in 1797, paid nearly all of its expenses during the first five years from production within the prison. The prison was sustained by the prisoners themselves, required no money from taxpayers, and aided in the rehabilitation of the inmates. By 1825, the legislature stipulated that the duty of prison agents was "to cause all the expenses of any kind, to be supported wholly, or as nearly as shall be practicable, by the labor of prisoners" (Morris and Rothman, 1995).

Artisans and businesses bitterly criticized public and private enterprises that used prisoners because of the competition the prison products created. Artisans also feared competition from ex-prisoners who had learned the trade behind bars, actively making it hard for ex-convicts to obtain jobs (Lewis, 1965). Artisans and businesses exerted pressure on legislatures for restrictive laws on prison labor and prison industry. Citizens argued that prisoners were taking the "means of livelihood from local communities" (Walker, 1988). Taxpayers argued such laws would "create a distinction in favor of the mechanic, or a wish to tax the farmer, the merchant, and the professional men, to support the convicts in our State Prisons" (Lewis, 1965). The New York Legislature in 1835 passed legislation that stated inmates would not be taught mechanical trades which competed with domestic labor. The 1842 New York Legislature limited employment of convicts to trades the prisoner had previously learned and practiced prior to conviction. This evolving public attitude toward prison labor was a precursor to the current debate.

The basic issue was how to protect free labor from low cost prison labor. One model to do so, the state-use system, allows the training and use of prisoners for the production of supplies for publicly owned institutions. Free workers viewed this as less competitive than the other forms of prison labor but opposed the selling of excess production in the market. To reduce competition, free laborers argued for diversity in products and low volumes to minimize the impact on any one free producer (Walker, 1988). Other methods argued for reducing competition from prison labor included price controls, limiting the hours or numbers of prisoners, requiring free market wages, and restricting capital improvements (Garvey, 1998). …

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