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Prison Labor's Race to the Global Bottom

In the early 1990's, David Horwitz owned Kwalu, a Capetown, South Africa based company which manufactured generic tables and chairs for fast food chains, hotels, and hospitals. Furniture construction is a labor-intensive business, and though Kwalu's labor costs in Capetown were low, Horwitz thought he could make them lower still. So in 1992 he relocated the entire operation to the town of Ridgeland, South Carolina, to take advantage of one of the cheapest labor sources imaginable: the prisoners of the Ridgeland Correctional Institution. Kwalu now lists its address as a post office box in Ridgeland.

It has become clear that there are companies who find it more efficient to employ American prisoners than workers from traditional reservoirs of cheap Third World labor. Depending on who you're talking to, this is either a win-win for all concerned, or clear evidence that capitalism's relentless "race to the bottom" doesn't end with child sweatshops in Malaysia. The idea of using prison labor as an alternative to sending manufacturing jobs overseas has gained ground in recent years, and is prominent among the arguments made by supporters of the prison labor system.

Ken Mellem is one of these supporters. In 1996, Mellem, then CEO of Geonex, a mapping services company based in St. Petersburg, Florida which had previously contracted with the Pentagon, won a contract with the English communications giant British Telecom, converting paper maps onto computer databases. Mellem considered having the work done at company facilities in India and Indonesia, but eventually he found that the prisoners of Liberty Correctional in Tallahassee came just as cheap.

Since the North American Free Trade Agreement went into effect in 1994, the U.S. has lost 3 million jobs, according to estimates by Public Citizen, an advocacy group. Using a domestic source of labor clearly made Mellem feel good about himself. "There are so many jobs going off-shore that we could bring back," he says.

But there were also more pragmatic advantages to using Liberty Correctional. Labor costs for the prisoners - who were supervised and paid by PRIDE, Florida's state-run "prison-labor contracting" firm - were comparable to those for the Asian workers. "We paid a rate that was competitive overseas," Mellem says, meaning about 90 cents-$1 an hour. But what really swung it for him were the benefits of an English-speaking work force, and the convenience of having the work done at an accessible location in the same time zone as company headquarters.

According to Mellem, things worked out well, and not just for Geonex. "These people had never worked as a team before," he says. "They got training, they learned to follow directions." Mellem believes that getting prisoners to work productively while on the inside helps prepare them for life after their release: "We hired three inmates out of Liberty once they finished. They were excellent employees, dedicated, with work skills. One of them said to me `I can make more money doing this than I can stealing.'"

Mellem was so pleased with his experience that he testified before Congress the following year about the benefits for the private sector of Florida's state-run prison labor industry, and about the system's rehabilitative effects. He's since been appointed by Governor Jeb Bush to PRIDE's board, where he's working to expand the prison labor system.

Mellem speaks with conviction about the benefits for prisoners of using prison labor to replicate conditions on the outside, the better to prepare prisoners for their release. But critics of the system, like human rights activist Paul Wright, have trouble believing that, for the private sector, easing prisoners' transition into the outside world is really the priority. "If they want to emulate conditions on the outside, can prisoners unionize to collectively bargain for their wages and work conditions?" Wright asks. "If not, then how voluntary is it?"

Wright also points out that the jobs prisoners get training for don't any longer exist on the outside in this country. Unicor, the agency that supervises federal prison labor, can only legally contract with companies who would otherwise have sent the jobs overseas. The rule is to ensure that federal prison labor doesn't take jobs away from non-prisoner domestic labor, but its very existence undermines the argument that prisoners are learning work skills that will be valuable upon release - unless those prisoners were planning to move to China.

For Unicor, like for Ken Mellem, bringing jobs home from developing countries is part of the point. Unicor, also known as Federal Prison Industries, uses federal prisoners to provide "services" for corporations. It's forbidden from manufacturing products for the private sector, but prisoners do non-manufacturing jobs like data-entry, magazine stuffing, and manning call centers on behalf of private companies. As of September 2002, Unicor had industrial operations at 111 factories, located at 71 facilities within the federal prison system. These factories employ over 21,000 prisoners, or over 18% of the federal prisoner population, and pay anywhere from 23 cents to $1.15 per hour (1).

Worldwide Automotive, which rebuilds starters and generators for cars, used to operate plants in China, Malaysia, and Mexico. Now, thru Unicor, it employs 120 prisoners at a Petersburg, Virginia correctional facility. The Worldwide Automotive contract is a poster child for the "job repatriation" idea that Unicor director Steve Shwalb has been seeking to promote over the last few years. Schwalb announced in 1998 that Unicor's work for the private sector would focus on winning back jobs that had gone overseas. And he told the Wall Street Journal the following year that he sees Unicor expanding into making toys and sneakers, almost all of which are made abroad.

But what's striking about the "job repatriation" plan is how unsuccessful it's been. Though some free market ideologues point to prison labor as a means of circumventing inefficiencies like the minimum wage, the fact is that without significant government support, Unicor has been unable even to meet its costs (2).

Schwalb's lack of success in using Unicor to return jobs to the U.S. comes as no surprise to Christian Parenti. In Lockdown America, [distributed by PLN, see ad on page 45] his 1999 study of the nation's prison system, Parenti showed why prisoners will never provide the consistent, productive source of low-cost domestic labor that is the holy grail of the private sector. One major problem is the intensely authoritarian nature of prison life, in which almost every aspect of a prisoner's daily routine is closely monitored by guards. Prison staff have no reason to care about the quality of the work produced, and often look suspiciously at anything that could upset their system of rigid control. Parenti cites the example of guards who forbade prisoners to stuff Victoria's Secret ads into magazines, claiming the material was pornographic.

Aside from the guards, the prisoners themselves are mostly just clocking hours, and rarely have much incentive to keep quality standards or efficiency up. 42 percent of Unicor's orders are delivered late, according to Parenti, compared to an industry-wide average of 6%. The military found that wire manufactured by Unicor failed at nearly twice the rate of the military's next worst supplier. And Navy officials who bought Unicor products, according to Parenti, complained that, "the product is inferior, costs more, and takes longer to procure (3)."

Once security costs are factored in, as well as lost productivity due to lockdowns, escapes, and other unavoidable disruptions of prisoner life, prison labor doesn't look like such a bargain.

Many businesses are also wary of giving prisoners access to sensitive personal information, like credit card and social security numbers. Before Ken Mellem of Geonex could land the British Telecom contract, he first had to convince nervous BT executives that there was no risk in giving prisoners maps of the English phone system. Unicor never allows prisoners access to credit card numbers, which limits the type of "services" it can provide for businesses, and the range of potential clients it can win.

There's also a more general public relations problem. Private firms can't be entirely sure that their use of prison labor won't leak out, and few companies want their products associated in the public mind with convicted felons.

Ultimately, says Parenti, prison labor just doesn't make economic sense. "The world is so full of impoverished desperate people willing to work for next-to-nothing that capitalists will always have other options." Schwalb of Unicor now seems reluctantly to agree. "In the global economy," he says, "we're never going to be more than a rounding error."

1. From Unicor's Annual Report, for 2002 (Year in Review).

2. Beyond the Prison Industrial Complex, Christian Parenti, Covert Action Quarterly, (Spring/Summer 2000)

3. Beyond the Prison Industrial Complex, Christian Parenti, Covert Action Quarterly, (Spring/Summer 2000)

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