RUINOUS or FAIR COMPETITION?

The Correctional Industries Public Policy Debate

"The effect of placing on the open market a volume of goods that have been produced below normal costs is to lower prices and disorganize the market ... The increase in prison production, which is predicted, will exaggerate this evil." So said the chairman of the Advisory Committee on Prison Industries, Arthur Davenport, in 1928, in a report to Congress following Herbert Hoover's 1924 conference on the "ruinous and unfair competition between prison-made products and free industry and labor."

Thus began a debate over inmate labor that continues into the present day. The private sector, Congress, state legislatures, labor organizations and the general public are among those who have expressed strong opinions on this issue since the early 20th century. These diverse groups have led corrections officials and policy-makers to develop multiple objectives throughout the years, which attempt to meet demands that often conflict with one another. Understanding the history of this ongoing exchange illuminates the current, most pressing concerns in correctional industries. We will look at traditional, state-run correctional industries, the more recent Prison Industries Enhancement Certification Program (PIECP) and Federal Prison Industries for an overview of the issues associated with each kind of program.

Traditional, State-Run Correctional Industries

Herbert Hoover's 1924 conference led to a series of legislative attempts to regulate and monitor correctional industries in order to offset some of the negativity these programs had generated. The solution to this conflict, his advisory committee concluded, lay in the elimination of the direct price competition of prison products with "free" products. The Ashurst-Sumners Act of 1935, which strengthened federal enforcement authority by making any transport of inmate-made goods in interstate commerce a federal offense, attempted to solidify this position. Further, the Walsh-Healey Act of 1936 (amended in 1979) controls the production of inmate-made goods by prohibiting the use of inmate labor to fulfill general government contracts that exceed $10,000. Only certification under the PIECP administered by the Bureau of Justice Assistance (BJA) can exempt an industry from the conditions of the Ashurst-Sumners Act and the Walsh-Healey Act. The Prison Industries Enhancement Act provides a maximum of 50 certified agencies nationwide with an opportunity to participate in the interstate market.

PIECP

PIECP represents an effort to create a "level playing field" for all stakeholders in the public and private sectors and a common purpose for both groups to pursue together. PIECP was created by Congress in 1979 to encourage states and units of local government to establish employment opportunities for inmates that approximate private sector work opportunities. The program is designed to place inmates in a realistic working environment with compensation that equals the local comparable wage for similar work. These wages allow offenders to offset the cost of their incarceration, compensate crime victims, provide family support and pay taxes. During this time, inmates learn marketable skills that increase their potential for meaningful employment and successful transition to the community upon release.

Federal Prison Industries

Federal Prison Industries (FPI) was created more than 60 years ago and has received a great deal of political attention because of its size and the number of inmates employed. Its growth in the past 30 years has given rise to several governmental efforts to regulate and supervise correctional industries at all levels. The debate in this arena has progressed somewhat differently than that in the state industries.

Shortly after the National Conference on Corrections in December 1971, at which Chief Justice Warren Burger gave the keynote address, the National Institute of Corrections was formed in Washington, D.C., as part of the Federal Bureau of Prisons, with a 16-member advisory board consisting of federal, state, local and private sector members.(1) Their objectives ever since have focused on improving the corrections field and providing a forum for the exchange of knowledge and the promotion of technical assistance. Burger also was instrumental in forming a number of other groups and convening several meetings, such as the Blue Ribbon Commission on Prison Industries, the Center on Innovations in Corrections and two Brookings Summits on Prison Industries, to debate issues related to correctional industries reform.

The Debate

Since the visibility of the correctional industries issue was raised considerably by Burger, other high-profile organizations have joined the discussion. In 1996, the National State Auditors Association (NSAA) conducted a joint audit of 13 state correctional industries programs, further raising awareness, as well as controversy, concerning the less-than-positive results. This audit examined whether these 13 programs(2) were reaching their goals of self-sufficiency, reduced cost to taxpayers, maximum inmate employment while incarcerated and post-release employment for inmates. While the report provides some useful information about potential areas of improvement, the methodology was not consistent and state auditors did not select the same areas for measurement of their industry programs. Often, conclusions were based on data from fewer than 10 states, which is not a representative sample of this diverse field of programs.

[TABULAR DATA FOR TABLE 1 OMITTED]

Correctional Industries Defined

Within traditional correctional industries, there are many organizational models for the administration of shop operations and the agency itself (See Table 1). Agencies' experience in business management, resources, facilities and production capacities varies widely across the nation. The model that relies most on the agency for the administration and supervision of an industries program is the state use model, in which operations are overseen entirely by the public agency. The market for the state use model is primarily government agencies. The corporate model mimics the state use model, but employs an entity to act in place of the government in the same capacity. Correctional facilities can partner with the private sector in a variety of other ways, whether it be on a contractual basis for specific goods or services, as a partner that helps the agency meet the needs of intrastate customers, or as part of PIECP, which allows interstate commerce.

There are other models within PIECP as well (See Table 2). In the PIECP Customer Model, the public agency supervises and administers all aspects of the program. The PIECP Employer Model gives more control to the private partner, which runs the factory and supervises and pays the inmates. The PIECP Manpower Model allows the private partner to manage the industries shops and supervise inmate workers, but the public agency administers the industries program and pays the inmates.

The Goal of Correctional Industries

Regardless of the model selected, most correctional industries share common goals of providing inmates with work experience and teaching work ethics. A number of jurisdictions employ elements of each of the models in order to meet these goals. For example, a corrections department may operate both state use and private sector non-PIECP industries. More than half of the states employ some form of the state use model. Nearly all states have a public agency manage the correctional industries division within the department of corrections.

What some opponents of correctional industries do not realize is that most state legislatures have mandated that all inmates work, although there are not enough job opportunities for the majority to participate in correctional industries. Nationwide, about 50 percent of the total inmate population in federal and state adult correctional facilities have some kind of work assignment. Only about 6.7 percent of inmates in these facilities are involved in a correctional industries program, and only about .26 percent of the total population is employed in a PIECP program. Granted, these figures do not reflect the percentages of the inmate population who are available for work, which are lower and difficult to estimate. The rest who are employed, or about 45 percent of the general inmate population, are ineligible for work assignments for reasons such as security classification or medical and mental health issues.(3)

According to the American Bar Association (ABA), "the largest category of inmate labor seems to generate the least amount of controversy and opposition." To participate in correctional industries, an inmate must apply, just as he or she would apply for a job in the free world.

The type of work inmates do has changed gradually over time, and will need to be focused more on service and less on manufacturing if the goal is to prepare workers to fill jobs in our global economy when they are released from prison or jail. As this trend develops in the marketplace, correctional industries must keep pace if they wish to remain competitive with the private sector, thereby creating jobs for inmates. At the same time, there is pressure for inmates to be assigned the type of work currently being done by foreign laborers in order to minimize impact on domestic workers and companies. There also is continued interest in security, particularly when it comes to inmates having access to personal, identifying information on private citizens. In fact, the General Accounting Office currently is in the process of assessing where inmates working in correctional industries have access to personal information, and to what extent. In general, the trend has been toward tighter regulation of correctional industries programs in an attempt to satisfy the disgruntled public and private sectors.

Clearly, there are many perspectives to consider when discussing the issue of correctional industries in its various manifestations. Reducing the main areas of conflict to the three primary issues may help us begin to focus on possible solutions to a long-standing problem.

The Climate: Rising Populations

From the perspective of correctional industries administrators, the discussion today revolves around one challenging question: How can industries employ the maximum number of inmates while teaching transferable skills in industries operated in an economically viable manner? The fact that the inmate population has risen dramatically since the mid-1980s has put a seemingly untenable burden on correctional industries to reduce management worries for those overseeing larger and larger numbers of inmates, while also fulfilling its obligation to taxpayers to remain self-sufficient. Some figures from the Bureau of Justice Statistics may illustrate what a difficult problem this has become.

Between June 30, 1997, and June 30, 1998, the overall prison population grew by 4.4 percent. Since 1990, the average annual population increase has been 6.2 percent, but even last year's increase indicates that an average of 1,475 new inmates were admitted every week from 1997 to 1998. From 1995 to 1998, the prison population more than doubled, thus prisons are having an increasingly hard time finding room for so many newcomers. Reasons for this trend include increased drug-related arrests and incarcerations, especially federally, served nationwide.(4)

Those who argue against these increasingly strict laws that are incarcerating more and more of the population realize the impossibility of providing meaningful rehabilitative programs to so many on a long-term basis. Because most inmates who enter prison will eventually come out, it is unrealistic and inhuman to think of inmates as useless drains on society, as opposed to the assets that many can become with the proper training and education. The shortsighted believe only in punishment, and do not see what lies just a little further down this road. Those with foresight, says James Alan Fox of Northeastern University, see "there is an eventual downside to [increasing the prison population]. What happens down the road when the number of ex-cons coming out of prison with poor skills and bad attitudes necessarily increases? Most prisoners don't go there forever. They come out and oftentimes, they come out worse because we're spending more money on construction of prisons than on treatment and programs in prisons."(4)

Few comprehensive recidivism studies have been conducted in correctional industries programs, but all studies thus far indicate those involved in industries programs are less likely to become repeat offenders. Florida, which has a strong post-release program in place, found that only 16.9 percent of inmates involved for at least six months in its correctional industries program, PRIDE Enterprises, were recommitted within two years from the time the study began in 1996. The national average recommitment rate is approximately 40 percent, according to PRIDE's 1998 Annual Report.

Many other states noted such dramatic differences. Utah also traced the recidivism rate based on time spent in the correctional industries program (See Table 3). Of those working in the program four to eight months, 57 percent were recommitted after being released in 1995. For those working more than 18 months, the rate decreased to 30 percent. Utah's overall recidivism rate is 70 percent.

Rehabilitation vs. Punishment

Assuming industries officials could find ways to employ the increasing number of inmates in industries programs, some would be unhappy about the success of such efforts. Many see correctional industries' success as an unfair corruption of the marketplace, allowing offenders to steal jobs from honest citizens. The National Work Group on Inmate Labor, formed out of the National Prison Industries Forum in May 1998 at the request of Congressman Bill McCollum (R-Fla.), has been unable to reach consensus on how to deal with the issues of displacement, wages and unfair competition. Displacement, or the creation of jobs for inmate workers that private citizens otherwise could hold, is generally acknowledged to be unfair practice. Some see displacement as a constant practice of correctional industries with each prison job equaling a private sector job, and some see displacement more broadly, as an overall balance between jobs taken by inmates and jobs generated in the private sector by the existence of industries programs' products and services.

The debate about inmate wages centers around whether or not inmates should be paid prevailing market wages, and whether or not this is feasible. Both labor organizations and private businesses see the consistent payment of inmate wages comparable to those in the private sector as preferable to paying depressed wages to compensate for other causes of lost profits. While acknowledging that the costs of running a business in a prison can reduce profits, some groups feel that the more important goal of giving inmates real-world experience can only be reached by promoting realistic work conditions, responsibilities and fair, reasonable compensation for labor. Also, consistent payment of comparable wages will make possible the orderly repayment of fines, penalties, family support, victim restitution and incarceration costs, reducing the burden on the taxpayer. The public sentiment for lower wages - or no wages as a form of punishment, largely drives public policy.

Some feel, however, that paying lower wages also is the most feasible way to compensate for the unique cost of doing business in prison. The problems associated with managing a profitable industry inside prison walls may drive profits down and costs up, such that lower wages must be paid to maintain a self-sufficient operation and maximize the creation of jobs for inmates. In order to keep correctional industry operations self-sufficient, given the confines of the setting and its limitations, lower wages may be a necessary compensation for the resulting additional costs.

Much of the private sector and some legislators agree that mandatory preferencing, enforced in most states by state use laws, or preference laws, should be phased out or immediately stopped. Mandatory preferencing means that state and federal agencies must attempt to purchase products from their correctional industries programs first, before seeking outside suppliers. The private sector sees this as an unfair advantage to correctional industries, which are allowed to "corner the market" on many items. While the sales and market shares of industries programs are small compared to the overall economy, there are self-reported instances in which private companies claim to have lost contracts or laid off employees due to competition with correctional industries programs. This constitutes, in the minds of some, an unfair advantage. In fact, U.S. Congressman Peter Hoekstra (R-Mich.) has repeatedly introduced legislation proposing the immediate removal of mandatory source preferencing for FPI. On Aug. 5, 1999, McCollum held a hearing in the House Judiciary Subcommittee on Crime, which he chairs, on his latest proposal that recommends a more gradual phase out of mandatory preferencing and offers access to alternative markets for correctional industries.

Economic Return

Another reality that must be faced is the high cost of maintaining facilities and inmates as the demand steadily rises. Correctional industries programs provide a way for inmates, particularly in PIECP, to reimburse society for the costs of their crimes and incarceration. Who will pay victim restitution, court costs, incarceration costs and family care, if not the inmates? Currently, the price too often is paid by the taxpayers. Correctional industries programs can help to remedy this injustice.

Solutions

How much impact do correctional industries really have on the overall economy? Not much, according to ABA, which formed a Subcommittee on Prison Industries in 1996 and conducted its own high-profile study of correctional industries, a draft of which was released in 1998. The report noted that only about .00056 percent of the national civilian work force consists of inmate labor.(5) Why, asked ABA, is there still so much heated debate? The association made two important discoveries: 1) difficulties arise more in particular segments of the private sector, namely the apparel and furniture industries, which argue that "their industries have been disproportionately harmed by correctional industries," and some other segments that appear to be more affected than others by the presence of correctional industries, and 2) the debate often has centered around emotional responses to the issue, rather than factual evidence.(5)

This issue has received attention not only from ABA and NSAA, but from other influential national groups, such as the National Governors Association and the National Association of Counties, each of which also has taken a public policy position on inmate labor. In an attempt to re-educate and update the public on the current issues not only in traditional correctional industries, but in PIECP as well, the National Conference of State Legislatures (NCSL) is advising the Bureau of Justice Assistance and the Correctional Industries Association (CIA) in their joint effort to update and revise the 1989 NCSL document, State Correctional Industries: Choosing Goals, Accepting Tradeoffs. While there has been increased focus on correctional industries and much discussion during the past few years, progress on reaching consensus among diverse interests has been slow.

Economists are now joining the debate, too, according to The Wall Street Journal's recent account of a conference held at George Washington University in Washington, D.C., May 21, 1999. In this preliminary article, several of the panel members seemed to be in agreement that employing inmate workers has a positive impact on the economy. The article mentioned the so-called "multiplier effect," which says that inmate workers' production requires other noninmate workers to produce and deliver their raw materials, transport their finished goods and service their facilities, which can result in a net gain in jobs for the economy.

"True, more expensive, private sector workers may lose their jobs in the resulting shuffle. But assigning work to the most cost-efficient producer is good for the economy," says Darren McDermott of The Wall Street Journal.(6)

Professor Richard Freeman of Harvard, one of the panelists at the George Washington University debate, suggests that manufacturing products which don't compete with other industries in the U.S. and selecting "inmates for work who are most likely to benefit from the rehabilitative effects" of discipline, vocational training and enhanced self-esteem may be the way to ensure a relatively uncontroversial and successful program.(6)

If correctional industries are not having a sizeable negative impact on the private sector, then a way must be found to deal with the intense negativity toward a program that is relatively small. The solution seems to lie in what is now a rather obscure corner of correctional industries, but one that has seen the most rapid rate of growth in the past few years. PIECP attempts to bridge the gap between the private and public sectors. In a recent article in a FPI newsletter, the CIA Immediate Past President Robert Grieser, pointed out no fewer than 20 advantages to private businesses wishing to keep production costs low in partnering with traditional correctional industries programs in the prisons.

As the labor market shrinks due to the health of the economy, many companies are looking to foreign markets for a labor force. Repatriation of work to inmates has advantages for everyone. Employers are assured a secure workplace with workers who are eager to gain experience and a long waiting list of others behind them should they prove problematic. Overhead often is eliminated, and the instability of working with a foreign entity is replaced with a set of managers and supervisors who want a successful program as much as private companies want a profitable operation.

The benefit to the U.S. economy should not be overlooked, either. According to Morgan Reynolds, an economist at Texas A&M and a fellow at the National Center for Policy Analysis in Dallas, "if half of all prisoners worked in market-type jobs for five years, earning $7 an hour in full-time employment, they could boost the nation's gross domestic product by $20 billion. Prison-based industries would have a ripple effect in their communities, as they tap local suppliers and other services."(7)

For those more concerned with the rehabilitative benefits of correctional industries on inmates, consider the words of one Maryland inmate: "Before prison, I had never held a regular job. I lived and made decisions impulsively in a multitude of get-rich-quick schemes - Most of which were illegal. My crimes provided only momentary gratification and ultimately led to my self-destruction. But in prison, as I learned to operate printing presses and gained more responsibilities, I became motivated and newly aware of my role as part of a working team. I began to take pride in my job performance and knew I was not only learning valuable skills, but also acquiring experience that would always serve me well."(7)

As Burger believed, inmates are human beings who often are allowed to deteriorate, but rehabilitating them will benefit not only them, but us, the society to which they will return.(8)

For the private sector, the program provides a stable and readily available work force. In addition, many correctional agencies provide manufacturing space and other overhead costs at greatly reduced rates to private sector companies involved in prison industry programs. To date, 40 of the 50 available PIECP certificates have been awarded, proving the benefits of the program are clear to many. About half the states have private sector non-PIECP industries, and nearly 70 percent operate one or more submodel under PIECP. In its initial years, PIECP designated an average of five cost accounting centers (CAC), or individual private sector partnerships, per year. Since 1995, the rate has increased to 20 CACs per year, with 30 expected this year. The amount of inmate jobs has increased nearly 200 percent during that period. Correctional administrators seem to see this program as a constructive option.

The Future

Correctional industries programs cannot be held solely responsible for the success or failure of the inmates. Most administrators recognize the need for other programs in addition to those associated with job training. The other components of total rehabilitation also must be implemented for lasting change to take place in the whole person. Without education, therapy and other enrichment programs, the benefits of the work program will be diluted.

As Michael Sullivan, former secretary of corrections in Wisconsin, said in response to a recent survey, "There needs to be better coordination of vocational training and work programs, as well as better prerelease and postrelease programs for inmates." Correctional industries cannot be the only means of rehabilitating the whole person. We must work collaboratively with the continuum of correctional and social services to better the rate of postrelease inmate success.

There are many areas in which further research is needed in order for all parties to speak more accurately about the issues involved in correctional industries. Economic impact studies that review the effect industries have on the surrounding private sector businesses have been conducted by some states, but rigorous and consistent methods need to be developed and applied across the country. The same is true of recidivism studies, which take into account environmental variables and available support. More are needed to encourage further development of job placement support and post-release programs that contribute to ongoing rehabilitation and post-release success. More research also is needed in the area of the cost of incarceration to society and on the actual recovered costs to society in the payment of victims, fines, court costs and child support through the correctional industries programs.

The CIA board of directors has recently approved and released both legislative position and public policy statements on correctional industries that strongly support further partnering with the private sector. While so much remains to be explored and discussed, the debate that has continued for nearly all of this century will never be furthered unless organizations and policy-makers work toward a consensus through which each affected party compromises for the good of all. Perhaps as we enter another century and another millennium, this difficult dilemma will finally be resolved by an old adage, "If you can't beat 'em, join 'em."

ENDNOTES

1 National Prison Industry Forum remarks by Warren Cikins; reprinted in the Detention Reporter, no. 75, May 1998.

2 Thirteen state audit organizations participated in this joint audit project: California, Delaware, Florida, Illinois, Louisiana, Maryland, Montana, New Jersey, New York, Oregon, Pennsylvania, Rhode Island and Virginia. Each audit organization conducted its own audit, and Oregon coordinated the project as a whole.

3 Statistics drawn from The corrections yearbook 1998, a publication of the Criminal Justice Institute Inc., Middletown, Conn.

4 The statistics in this paragraph are all culled from Edward Walsh's article "Prison Population Still Rising, but More Slowly," The Washington Post, May 15, 1999.

5 American Bar Association. 1998. Inmate labor in America's correctional facilities: A preliminary report of the American Bar Association's subcommittee on correctional industries. April, p. 18.

6 McDermott, Darren. Economists join debate on prison work. The Wall Street Journal, May 20, 1999, p. A2.

7 Quoted in "An Inmate's View of Industries," by Larry Bratt, CIA News, vol. XV, no. 3, p. 9.

8 National Prison Industries Forum remarks by Warren Cikins, reprinted in the Detention Reporter, no. 75, May 1998.

Gwyn Smith Ingley is executive director of the Correctional Industries Association (CIA). Maureen E. Cochran is a project assistant for CIA. For more information, please contact CIA at [phone] or by fax at [phone]. CIA's Web site, www.corrections.com/industries, also provides multiple links to related governmental and agency pages of interest.