Is Federal Prison Industries Stealing Jobs?

It's hard to compete with workers willing to take pay as low as 23 cents an hour. Do I mean workers in Guatemala or Vietnam? No. I mean Americans in federal prisons.

Two American companies which make military uniforms are laying off hundreds of workers as the federal government decides to use prison inmates to make soldier fatigues. American Apparel currently charges $29.44 per uniform. The cost will increase by 15 percent when Federal Prison Industries (FPI) convicts begin sewing the clothing at a cost of $34.18 each. FPI also functions under the name UNICOR. The convicts are reported to receive between 23 cents and $1.15 per hour. That’s quite a markup for FPI. The ethical question is whether it is right to take work away from private industry to support a prison-based program with the government’s blessing?

Under the law, FPI receives preference for contracts up to a certain percentage, about 7%, before they have to compete against private industry. My concern is an item such as the army combat uniform is earmarked directly for FPI without competitive bidding. American taxpayers pay more for it, but the bottom line is each soldier is paying more for their uniform.

FPI currently operates approximately 80 factories with more than 13,000 convict workers. The correctional institute factories are not permitted to sell goods to the private sector. The law mandates that federal agencies buy the products, even when they are not the least expensive available option.

Critics accuse UNICOR which last year pulled in $900 million in revenue, of shifting its focus from the betterment of inmates to profits. Those profits, they allege, have largely come at the expense of small business which are already struggling to secure government work. A bipartisan group of lawmakers has proposed new rules that would change the way prison manufacturing companies do business, subjecting them to stricter standards that would lead to higher prices.

In my mind it is difficult to ethically justify the program when so many US businesses are suffering from the great recession. I recently read that Alabama-based American Apparel was forced to close one plant and downsize at others due to the loss of contracts to prison inmates, according to company spokesman and retired Air Force Colonel Kurt Wilson. A total of 190 employees had their hours cut, and 255 others were laid off this year.

Also, I can’t think of any other situation where the government awards a contract to a private company without competitive bidding. I don’t like the government picking winners and losers with respect to government contract work when the playing field is not level.

One way to justify the FPI program is that it teaches inmates a skill and aids in their adjustment back to society. Some claim it also can decrease crime because that skill will enable them to become productive members of society. I’ll withhold judgment on that claim until the program has had several years or so to follow inmates in the program who have subsequently been released back to society. However, I can’t help but wonder whether the adjustment “reason” is a rationalization for an unfair action that knowingly harms private companies making military uniforms.

It seems to me if we want to teach inmates a marketable skill it should start with computer skills. These are in great demand and are transferable to any numbers of jobs and occupations.

I can’t imagine what would be the uproar from the public if we were importing goods manufactured by prison labor in someplace like China? That leads me to my final point. How can we argue against outsourcing manufacturing overseas to countries like India and the Philippines when we insource manufacturing in the US to companies chosen by the US government and not by free-market principles? It seems to run counter to our capitalistic system that relies on non-interference by the government. You know the “laissez-faire” concept!

Blog posted by Steven Mintz, aka Ethics Sage, on October 9, 2012