NCPA - National Center for Policy Analysis

Is Competition From Federal Prison Industries Fair?

July 22, 1999

Federal Prison Industries -- a self-supporting arm of the Department of Justice -- has traditionally employed prisoners in making clothing, furniture and other goods for the federal government. Now it is seeking to sell services -- such as coupon sorting, packaging and data processing -- to commercial firms.

That strategy riles some politicians, labor unions and business concerns. They see it as stealing private sector jobs.

  • At present, FPI employs about 20,000 prisoners and pays them much less than the minimum wage.
  • With the prison population growing faster than wardens can find jobs for inmates, FPI's goal is to employ at least 20 percent of those eligible for work -- thereby cutting down on the number of idle prisoners and the potential for turmoil behind bars.
  • FPI's critics are out to strip it of its most valuable asset: the right of first refusal on federal contracts for hundreds of goods -- ranging from swim trunks to, ironically, steel security doors.
  • FPI's inmate workers are only about one-fourth as productive as their private sector counterparts.

That is due in some degree to its peculiar mandate. While it is expected to be financially solvent, it also must employ as many prisoners as possible. So it deliberately tackles labor- intensive jobs in the most labor-intensive ways. For example, tasks that could be done by machine are done by hand. Also, the fact that many prison employees have few skills and have never held a job contributes to inefficiencies.

As a result, there must be a quality-control manager for every eight inmates -- a ratio far higher than in the private sector.

FPI expects the number of inmates under its supervision to increase 50 percent by 2006 -- to 30,000 workers.

Source: Rodney Ho, "Mr. Schwalb Is Putting His Inmates to Work for the Private Sector," Wall Street Journal, July 22, 1999.


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