Prisons

BUSINESS BEHIND BARS

Former Reagan Attorney General Ed Meese has a way to slow the exodus of
jobs overseas: put prisoners to work.

Behind the barbed-wire fence surrounding the Federal Correctional
Institution at Elkton, Ohio, inmates sit at a long table stripping down old
computers, salvaging valuable bits of gold and platinum. In another room
prisoners clad in protective suits hammer away at monitor screens and
cathode tubes, the smashed glass destined for sale to reprocessors.
Computer recycling is difficult, labor-intensive work--exactly the type now
being exported to China and other bastions of cheap labor. But Elkton gets
business from government agencies and schools precisely because it can
compete with Third World wages. In fact, other state and federal prisons
have also gone into business, making products for companies such as Home
Depot and Lowe's.

Why the sudden interest? The U.S. prison population has reached 2.1
million, up from just 300,000 20 years ago. Cash-strapped state governments
are struggling both to cover the annual cost of incarceration, which has
swelled over that time from $3 billion to $40 billion, and to find enough
work to keep all those prisoners occupied.

Prominent conservatives have been encouraging prisons to put inmates to
work for years. Led by Edwin Meese, the former U.S. Attorney General and
head of the Heritage Foundation, and Morgan Reynolds, one of the first
President Bush's economic advisors, they have lobbied for real prison
employment by the private sector--not just make-work projects like stamping
license plates or building courthouse furniture. The benefits are difficult
to ignore: Businesses get cheap, reliable workers; inmates receive valuable
job training and earn more than they would in traditional prison jobs; and
the government offsets the cost of incarceration and keeps jobs and tax
dollars in the U.S.

Corporate America has started to pay attention. The number of inmates
employed by the private sector is still relatively small: 10,000 prisoners
working for about 250 companies. But that is up significantly from the mere
handful just ten years ago. Meese estimates that companies could easily
employ ten to 20 times as many inmate workers.

While some companies have embraced prison labor, many have been reluctant
to do so. Recently, for example, Dell abruptly canceled its contract with
Federal Prison Industries (Unicor), which operates Elkton and six other
computer-recycling facilities. The decision came just days after the
national media reported on an environmental group's charge that the prison
operation was a "poor example of worker health and safety." (Larry Novicky,
the head of Unicor's recycling program, insists that all facilities meet
federal standards.)

Dell's experience is typical of the conflicting attitudes
entrepreneurs--and society--have had toward prison labor since Jeremy
Bentham first proposed, more than 200 years ago, that work could
rehabilitate prisoners. Yes, there are benefits, but there is also what
Knut Rostad, Meese's colleague at the Enterprise Prison Institute, calls
the "icky" factor--the specter of poor working conditions and chain-gang
abuses. "In many ways," says Rostad, "it is still easier for a company to
go to Mexico or China than to a prison in its own backyard."

Despite Dell's retreat, a number of FORTUNE 500 companies have purchased
prison-made goods. And for certain businesses--those that use manual labor
but don't make enough goods to support factories offshore--using inmate
workers is particularly attractive. Take Anderson Hardwood Floors. Since it
entered South Carolina's Tyger River Correctional Institution in 1996, the
company has been able to introduce labor-intensive, handcrafted wood floors
that would be prohibitively expensive to make outside the prison fence.
"When the doors close behind you the first time, it's a bit unnerving,"
says CEO Don Finkell. "But it doesn't take too long to see that it's just
like working on the outside."