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...major potential negative. paper addresses the quantitative financial and employment consequences on local free labor and industry of prison industries in Ohio using an input-output model for Ohio. Based on the analysis, prison industries employment in Ohio has negligible to positive employment consequences for the Ohio economy and partially offsets the incarceration cost of the inmates who participate--providing between 5 and 10 percent of the incarceration cost in net cash flow and induced tax revenues. (JEL H70)
Introduction
The cost of incarcerating criminals in the United States has been escalating over the past two decades leading to attempts to determine ways of covering the cost. Correctional expenditures nationally increased 9.95 percent annually between 1982 and 2002. From 1985 to 1995, the prison population grew 7.3 percent annually, and then grew with a 3.6 percent annual growth rate to a total of two million prisoners in state and federal prisons in 2002 [Harrison, 2003]. Each of these rates far exceeds the population growth rate of 1 percent from 1970 to 2000 by a considerable margin.
One proposal for alleviating the incarceration cost burden is prisoner labor. Prisoner labor is inmate employees producing goods and services for sale and use outside of the prison. (1) Prison labor provides positive cash flow from the economic activities, helping to fund the prisons. It also provides productive activity and training for the prisoners. However, prison labor impacts the local community surrounding the prison. While the rhetoric in favor and opposed to prison labor is heated, there is limited quantitative evidence of these impacts and costs.
Scott and Derrick [2004], using a labor supply and demand model, provided the first empirical estimates of crowding out. They conclude that employment of 100 prison laborers crowds out between 13 and 20 unskilled private sector jobs nationally. Although the aggregate number of jobs lost is low, the jobs crowded out are thought to be localized near the prisons and focused in the industries in which the prisoners participate. Thus, the empirical question remains as to the extent of crowding out in the local labor market. Countering these negative effects are economic expansion effects resulting from prison industries hiring free labor as managers and purchasing inputs from the private economy, as well as consumer spending of their income by prisoners. Spending on private sector labor, goods and services leads to subsequent spending by the private firms and their employees generating additional private jobs, income and tax revenue.
This paper initially enumerates a number of these costs and benefits and then quantifies the local impact that happens through purchasing of inputs and displacement of local labor for the Ohio Prison Industries. It is the first to provide empirical estimates of the net local economic effects, incorporating crowding out and secondary effects, at the state level. An input-output model for Ohio was used to estimate the local impacts of prison labor for the state of Ohio.
Costs and Benefits of Prison Labor
Supporters of prison labor focus on improved prisoner behavior, (2) lower recidivism, and increased future employment and earnings resulting in higher tax revenue and lower costs for social programs. Active prisoners are likely to be cooperative within the prison itself. This is enhanced since prisoners view prison industry work as desirable, leading to their conforming to the guidelines necessary to qualify for this work. These requirements can be pursuing a GED if they have not graduated from high school or avoiding 'infractions' (e.g., fights or severe rules violations). The behavior of both the active participants and the applicant queue is affected, extending the impact on behavior.
Prison labor also provides skills and socialization which may affect prisoner behavior after they are released. Successful work post-release decreases the probability of returning to a life of crime and being reincarcerated (recidivating), affecting the future size of the prison population. This effect has been studied by Scott and Derrick [2005] in the case of Ohio Prison Industries (OPI). The overall conclusion is that effective job and educational programs can create significant cost savings for state prison systems with fewer inmates returning to prison at all and some returning later than previously expected.
Positive effects also include the net positive cash flow from prison industry activities (offsetting taxpayer cost of incarceration) and the expanded economic activity related to the purchase of inputs. Reynolds [1996] projected that the employment of 25 percent of all prisoners would decrease taxpayer costs by approximately 10 percent, 2.4 billion dollars. In addition, proponents argue that some prison labor is actually repatriating unskilled and semi-skilled jobs currently being exported internationally.
Proponents argue that the negative effects of prison labor are overestimated and are outweighed by the positive effects. Low prison wages must be interpreted in the context of prisoner productivity due to lack of job...
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