Prisoners must earn the right to work in the Michigan State Industries program. One state official described the inmates, who volunteer for this program, as a "warden's best friend," because they are so well behaved. The prisoner shown here is a part of this program.
Michigan State Industries (MSI) is a government program modeled on a federal
program called Federal Prison Industries (FPI). Both programs employ inexpensive
prison labor in the production of goods made for government bureaucracies.
Federal prisoners make clothing, vehicle parts, and dozens of other products,
and sometimes compete directly-and unfairly-with private, for-profit businesses.
MSI makes products as varied as dairy products and shoes. Both FPI and MSI make
furniture in competition with Michigan private industry. Both federal and state
governments should privatize these programs, either in part or completely.
Federal Prison Industries alone has over 22,000 inmates at its disposal in
more than 100 prisons. Prisoners in the FPI system constitute a captive labor
force and are sometimes paid as little as 25 cents per hour. At the federal
level, agencies are required to buy goods from FPI. Private suppliers are locked
out of the bidding process. The result is that FPI can charge government
agencies higher prices than would be charged by private vendors for the same
goods-and they do, almost 50 percent of the time. This is according to a General
Accounting Office analysis of FPI product prices on 20 representative goods.
As of 2000, MSI operated 29 factories in 18 prisons. It pays prisoners an
average of $7.00 per hour. The good news is that MSI must compete on a more open
and level field than Federal Prison Industries. If a state agency finds a bid
for furniture from Haworth Inc., for example, to be more competitive than one
from MSI, the agency can award Haworth the contract.
Convict labor serves good and useful purposes. The value of goods and
services produced by inmate labor can reduce the net social cost of
incarceration; in the absence of prison industries, the forgone product of
inmate labor would represent an unnecessary economic loss. In addition, as a
result of prison-industry employment, many inmates do leave prison with
employable skills and work discipline they lacked upon arrival. Thus, prison
industries may well contribute to the prisoners’ reintegration into society and
How should we change the system to preserve the social good of voluntary
prison labor, while placing the goods it produces on an equitable footing with
the markets they serve?
A bill recently introduced in Congress by Rep. Peter Hoekstra, R-Mich., would
allow private companies to compete with FPI based on open and fair competition
in the sale of goods to government agencies and prohibit FPI from selling its
goods to non-government entities.
These ideas would result in a more equitable system. But another way to deal
with the problem would be for federal and state governments to allow private
firms to competitively bid for the right to use prison labor. In other words,
the solution is simply to create a “free market” for prison labor by allowing
businesses to contract for state prison labor.
Under such a system, contingent upon their meeting state security mandates,
any firm could offer employment to prisoners and would be free to sell the
products of prison labor on the open market. Employers would determine wage
offers and other applicable conditions of employment.
The costs of security services-for those inmates allowed to work outside the
prison-would be borne by the employer, while other incarceration costs (mainly
health care and housing) would be borne by the state. Two factors could make up
for the extra expense of providing security services: a) wages for such labor
will inevitably be lower than for comparable labor on the outside; and b) the
state could levy a special payroll tax on prisoner earnings.
Once this, or some similar system, put the economics of prison labor on an
even footing with the rest of the labor market, the same thing would happen to
this sector that happens with the others: It would eventually find its optimal
niche in the labor economy. In other words, removing the unfair advantage prison
labor currently holds would, over time, reveal which industries and
manufacturers are best able to make use of this unique sector of the labor
force. As the system currently operates, this information is prevented from
coming to light.
Congressman Pete Hoekstra disagrees with the idea of bidding on prison labor
itself, saying “the devil is in the details.” He fears that such proposals would
scrap safeguards against unfair competition enshrined in today’s Prison Industry
Enhancement program, which allows for the selling of products made by prison
labor in the commercial market under special circumstances. For instance, once a
program is certified, prison labor may only be used on projects that would not
cause the “displacement of employed workers or be applied in skills, crafts, or
trades in which there is a surplus of available gainful labor in the locality,
or impair existing contracts for services” among other criteria.
Government should not be able to take unfair advantage of a captive labor
force to the disadvantage of hard-working, law-abiding citizens who happen to
produce the same kinds of products produced by prison labor. Federal and state
prison industries should be reformed to maximize their value to the economy, and
to ensure fairness both to prisoners and to law-abiding workers.
Dr. Stephen Dresch is a Ph.D. economist and a former state legislator who
resides in Hancock, Michigan. Michael LaFaive is an economist and senior
managing editor of Michigan Privatization Report.