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Microsoft Out-Cells Competition

In the Seattle area, home to software giant Microsoft, it's not uncommon to hear the phrase "Microsoft Millionaire." There exists a large number of ex-Microsoft employees who made their millions, quit the company, and are now free to enjoy other pursuits. Many of them are quite young, in their thirties or forties.

Not everybody who toils for Microsoft, however, can hope to become a millionaire as a result. Many of Microsoft's products are packaged and shrink-wrapped by prisoners at Washington's Twin Rivers Corrections Center (TRCC).

According to one prisoner who works for Exmark, a company specializing in product packaging, approximately 90 prisoners at TRCC packaged 50,000 units of Windows 95 demo disks and direct-mail promotional packets.

"Those were good times for us, he recalls fondly. "Everybody had plenty of work then." That same worker says he was laid off after the Microsoft contract, and he hasn't worked since. Each day, he says, he checks the bulletin board: Exmark posts a "call-out" list with the names of those workers fortunate enough to have a job the following day. He explains that those prisoners with the least seniority or who have fallen into disfavor - for anything from back-talking to poor work habits - will appear on the call-out list only for the largest contracts.

Exmark is a subsidiary of Pac Services, a Washington company which also employs non-prisoner, or "free world" workers. Steve Curly, a "free world" supervisor at Exmark, denied the company had packed any Windows 95. But he said that Exmark's TRCC operation had packed tens of thousands of units of Microsoft Office, and had wrapped and shipped as many as 40,000 Microsoft mice in one week.

Many of Exmark's prison workers are employed mainly, as one prisoner puts it, "when they have a big contract and need the extra workers." When work is plentiful, Exmark's prison workers shift into high gear, often working both day and swing shifts. At other times the crew is scaled back and most workers remain idle in their cells.

Exmark workers say that Microsoft is not the only beneficiary of Exmark's "flexible" labor force; they also claim to have regularly packaged goods for Costco, Starbucks and JanSport. They also say that Exmark not only packages retail goods, but also stuff envelopes for mass mailings, something they claim to have often done for telecommunications giant US West.

Most people are surprised to learn that private corporations use prison labor. After the initial shock, however, many think it's a terrific new idea. There has been considerable debate as to whether or not it's a "terrific" idea, but rare is the challenge to the premise that it's a "new" idea. Most people assume that corporate prison labor is a recent innovation. Nothing could be further from the truth.

Beginning in 1817 with New York's Auburn prison, the predominate U.S. corrections model was based on a scheme generally referred to as "lease prisons." Sometimes private business entities contracted with states to operate their entire prison system; other times the state would operate the prisons and "lease" the prisoner labor to businesses.

Nineteenth-century prisons were essentially forced labor camps. Prisoners were made to produce a wide array of goods including shoes, furniture, wagons, and stoves. For the sake of profit they were often housed in squalid conditions, fed spoiled food, and given scant clothing or shoes. Whippings were commonplace, and medical care was non-existent.

Dr. Lewis Wynne, executive director of the Florida Historical Society says that since states rarely monitored conditions, operators of lease prisons often worked prisoners to death. Mortality rates, Dr. Wynne said, ran as high as 40 percent.

From almost the very start of the lease labor prison system, there were scattered protests from manufacturers' associations and organized labor. The states were addicted to the cost savings, however, and refused to dismantle the lease system. Events in Tennessee provide an illustrative example.

In the 1870's competitors of the Tennessee Coal, Iron and Railroad Company charged that convict labor gave that company an unfair competitive advantage. Their protests fell on the deaf ears of state law makers, and the lease system continued.

In 1891, the company locked out all of its union workers for refusing to sign a "yellow dog" contract that would have barred them from union membership. The company replaced the locked out union workers entirely with lease convicts. In what was dubbed the "Coal Creek Rebellion," angry union miners stormed the lease prisons, released over 400 prisoners, and loaded them onto trains headed for the state capital. The company filled up the work camps with more convicts. The miners released those prisoners, too, and this time they burned the prison stockades to the ground. Shortly thereafter, Tennessee finally dismantled the lease labor system.

By the beginning of this century most other states had followed suit, enacting a patchwork of state laws abolishing or restricting the use of prison labor by private enterprises. Two New Deal era federal laws, the Hawes-Cooper Act and the Ashurst-Sumners Act effectively ended the private business-convict labor relationship. Ashurst-Sumners made it a federal offense to move prison-made goods across state boundaries, irrespective of individual state laws. Thus ended this first round of prison labor profiteering.

In the 1970's Chief Justice Warren Burger, born 16 years after the Coal Creek Rebellion, began proselytizing for conversion of U.S. prisons into "factories with fences." Congress was a willing convert. As part of the Justice System Improvement Act of 1979, Congress passed an amendment which established seven Prison Industry Enhancement (PIE) pilot projects which would be exempted from the provisions of Ashurst-Sumners. By 1984, PIE had grown to 20 pilot projects, and the definition of project was changed to encompass not just a single business, but all businesses set up in prisons by either a county or a state. The law was again amended in 1990 to allow up to 50 pilot "projects" (e.g. states) to participate. Today all of the prison products from as many as 50 states or counties may legally enter the stream of interstate commerce. And so begins round two of the prison labor profiteering racket, with a PIE big enough for any business in any state to start grabbing a piece of the action.

For companies like Exmark, it is an attractive proposition. Exmark pays its prison workers the minimum wage ($4.90/hr in Washington), but that figure is misleading. The Department of Corrections (DOC) deducts 20% of prisoners' wages to recover "cost of corrections." (Calculations indicate that the 20% deduction from the wages of 100 such prisoner workers is enough to subsidize the salary and benefits of eight guards.) Another 10% is deducted and placed in a non-interest bearing "mandatory savings account." Five percent is deducted for a "Victims' Compensation Fund" administered by the state. Federal Income Tax, Social Security tax, and Medicare tax are also withheld. The DOC can deduct an additional 20 percent to pay court-ordered restitution, court costs, and other debts. When all is said and done (after everybody else has taken their little slice of the PIE!) prisoners can see a spendable wage of $1.80 to $2.80 per hour. But even this amount is generous, because the law actually authorizes up to 80 percent of a prisoner's wages to be deducted, meaning they could actually "take home" less than one dollar an hour.

Exmark and other private industries operating in Washington's prisons do not have to provide their prison workers with any benefits such as health insurance workers' compensation, or retirement (although the state offers a comprehensive "Three Strikes" retirement plan!). These operations are further subsidized by the state in that they usually pay little or nothing for the factory, office, or warehouse space in the state's prisons.

Exmark has a "lease" (sound familiar?) with Washington state wherein they pay only one dollar per month for an impressive amount of factory and warehouse space. The DOC often subsidizes other overhead expenses (like 24-hour security) that a private company would otherwise have to pay in a non-prison setting.

Many of the prisoner workers claim the arrangement offers them tremendous benefits, and these claims are backed up by a waiting list of at least one year for TRCC prisoners hoping to get an Exmark job. Workers say that since they have no real living expenses, most of the money they earn in industry jobs can be sent home to help support their families. Many of them express a fierce sense of pride in the fact that they provide for their families, even while they are imprisoned. Since most prison jobs pay 25-38 cents an hour, the prospect of working at Exmark is considered by most prisoners a terrific opportunity.

Some prison rights activists also think that private industry jobs are a boon to prisoners. Charlie Sullivan, Co-Director of CURE, a national prison rights organization, was recently interviewed by Corrections Compendium. When asked about CURE's accomplishments over the past five years, Sullivan said, "I think in general it seems like where we've been successful is concerned with employment. We've been working on prison based industries, which involves a philosophical argument going on in the prison reform community - particularly the left wing, which is worried about exploitation of prisoners. But I feel very strongly that we should be moving in the direction of supporting the idea, though certainly there should be caution in setting them up.... As I've said, the whole goal of the system should be to make prisoners employable upon release."

But what kind of jobs will await these "employable" prisoners when they are released? Many of the jobs that might otherwise be available to them may have moved into prisons. Lockhart Technologies, Inc. is one example of a company which eliminated 130 "free world" jobs. They closed their Austin, TX, circuit board assembly plant, moved all of their machinery inside of a private prison (operated by the Wackenhut Corporation) 30 miles away, and used state prisoners to replace the 130 workers they laid off in Austin. The prison actually designed their factory space to Lockhart Technology's specifications and charges the company one dollar a year rent.

In 1994 the Washington DOC built, with taxpayer money, a 56,000 square foot "industries building" adjacent to the Washington State Reformatory. The state has worked hard to attract private industries to move into the factory space. So far they have attracted Elliottt Bay Metal Fabrication; A&I Manufacturing, Inc.; and Redwood Outdoors, Inc.

Elliott Bay manufactures micro-brewery vats and commercial fishing equipment such as pans, conveyor belts and storage tanks. They employ eleven highly skilled welders and metal fabricators, but as with most prison industry jobs, the applicants must bring these skills to the job before they are hired. Elliott Bay does not run a job-training program, and they are not in the business of providing job skills to prisoners. They operate in the prison solely to make a profit.

A&I Manufacturing fabricates window blinds, mini-blinds, cell shades (blinds made out of cloth), wire shelving, and are expanding into other window coverings such as curtains. All of their output is sold to De-El Enterprises, Inc., a local company who in turn deals with construction contractors to outfit entire buildings with blinds, shelves, etc.

Redwood Outdoors is a garment manufacture, employing about twenty prisoners. Prison workers at Redwood say they make clothing for Eddie Bauer, Helly-Hanson, and Brooks, among others. Most Redwood workers are reluctant to talk about their jobs, especially about whose labels they sew into the garments they make. "Eddie Baur doesn't want anyone to know they use prison labor," one said in a hushed tone.

Considering the cost of the 56,000 square foot building, the salaries of guards and DOC supervisors, maintenance and administrative costs, it is debatable as to whether the DOC makes any money with prison industries, especially considering that they charge a paltry $1/month to lease out the factory space.

The state legislature is nevertheless committed to expanding private prison industries. In its 1993 session, the Washington legislature passed Senate Bill 5989, codified as RCW 72.09.111. The law mandates that the Washington DOC increase the number of prisoners employed in "Free Venture Industries" by 300 jobs a year, with a net increase of 1,500 new prison industry jobs by the year 2000.

There is language in the statute that alludes to a concern that state prison industry jobs don't displace free workers, stating that the industries shall "provide Washington state manufacturers or business with products or services currently produced by out-of-state or foreign suppliers." The law also says that the DOC is supposed to conduct "an analysis of the potential impact of the proposed products or services on the Washington state business community and labor market."

One could argue that some prison-made goods, like the garments sewn for Redwood Outdoors, may indeed fall into a category of goods "currently produced ... by ... foreign suppliers" such as the infamous maquiladora sweatshops in Mexico and Central America. But what about the micro-brewery and fishing equipment fabricated by Elliott Bay? Are there no Washington state metal fabricators who might produce those goods? What about the blinds and window shades manufactured by A&I? Is there not one Washington state company that could offer those jobs to unemployed free workers?

The law requires the DOC to conduct an analysis of the potential impact of prison industry jobs on the local labor market. But the law is silent about what that analysis might show, or whether the DOC should be prevented from creating prison industry jobs that displace outside workers. Here is one informal analysis: Why should companies like Elliott Bay or A&I Manufacturing offer real-world jobs to unemployed free workers? Not when they can move into factory space provided by the state, and employ a "captive work force" at minimum-wage which they can hire, fire, and lay-off at whim. And how can other local companies compete with these prison industries? The answer is, they can't. Companies like Elliott Bay and A&I drive out local jobs and drive down the wages of free workers.

One Elliott Bay worker was talking the other day, boasting that "Elliott Bay is the best program in the joint." He claims that working there allows him to hone his welding skills and prepare for a job on the outside. When it was pointed out to him that Elliott Bay probably takes jobs away from workers in society, he replied, "[Screw] society! Society locked me up."

But which segment of society is truly being screwed by prison industry jobs? Those who own stock in Microsoft, US West, Costco, and Starbucks are probably satisfied with the arrangement. But unemployed welders, metal fabricators, factory workers, and laborers might see it differently, especially when they realize that the only way they can get a job might be by going to prison.

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