Paying Inmates Minimum Wages Helps the Working Class

(Bloomberg View) -- It's a movie cliche -- a bunch of men in white-and-black striped pajamas, with chains around their ankles, breaking rocks in a quarry under armed guard. The media has taught us that prison labor is the natural state of the world -- a way to make the punishment for wrongdoing a little more unpleasant, and a way to make criminals sweat off whatever sinister restlessness drove them to crime.

But the reality is that prison labor is just a way that governments try to recoup some of the cost of incarceration, by farming out their prisoners as captive labor. That might help governments' bottom line a little bit, but it creates devastating competition for low-wage American workers.

The U.S. locks up an extraordinary number of people. Its incarceration rate is the highest in the world and at least twice that of any other advanced economy, and significantly higher than authoritarian Russia. Of incarcerated Americans, about a million and a half are in prison. That number surged in the 1980s and hasn't fallen much from its peak in the mid-2000s. A 2016 report by the Sentencing Project shows the dramatic change:

That enormous prison population represents a vast pool of ultra-cheap labor. A recent report by the Prison Policy Initiative found that the average wage of a prison worker is 93 cents an hour, and the lowest reported wage was 16 cents.

Compare that to the federal minimum wage of $7.25 an hour. How can a free American worker compete with an inmate laborer making less than one-tenth that amount? Even if prisoners are less productive than free workers, the wage difference is overwhelming.

Nor are these prison workers breaking rocks, like in the old movies. In the modern day, the government contracts them out to private companies, offering inmates as a way to boost the bottom line. Over the years, prisoners have packaged coffee for Starbucks Corp. and wrapped software for Microsoft Corp. They manufacture furniture, schools supplies and food products. They make dental products, train animals, work in call centers and even pick cotton.

All of these activities put prisoners in direct competition with blue-collar American workers; the latter has essentially no chance. In recent years, there have been political uproars over guest workers, unauthorized immigrants and offshoring U.S. jobs to low-wage countries such as Bangladesh. But low-wage immigrants don't do much to lower native-born wages, and laborers in Bangladesh don't have the tools or the proximity to compete directly with most American workers.

If you want to ease the pressure on the beleaguered U.S. working class, paying prisoners more is the best bet. Mandating that prison labor receive the federal minimum wage would open up lots of job opportunities for low-wage workers on the outside.

It would also be the moral thing to do. Detractors often call the prison labor system slavery, and while there are differences between modern prison labor and the slavery system of the old South, the similarities are way too close for comfort. The U.S. has always valued free labor over compulsory work -- as historians have documented, this was one reason slavery aroused such ire in the antebellum North.

Prison labor therefore goes against traditional American values and humanitarian concerns alike. Writers who have gone to watch the prison labor system in action report being stunned by how widespread and accepted this un-American system has become, especially in states like Louisiana with high rates of incarceration.

Morality also demands that prisoners should receive more of the money that customers pay for their services. Currently, inmates receive only about a quarter of that money, including the portion that goes to victim reparation funds.

Reduced demand for prison labor due to higher wages, especially if prisoners are allowed to keep more of what they earn, would mean government finances will take a hit. Incarceration is expensive, costing about $30,000 a year for a federal inmate. But maybe raising the cost of throwing Americans in prison is a good thing.

The incredibly high U.S. incarceration rate is a strong indication that the country is locking people away for crimes that don't really require it, such as drug use or petty theft. But recently, high costs are forcing states to reduce their prison populations. Presumably, that will limit incarceration to those who really need to be locked up. The end of mass incarceration will also help the economy and reduce inequality -- some estimates claim that the practice of imprisoning millions of Americans has increased the country's poverty rate by 20 percent, even before taking into account the wage competition from cheap prison labor.

So paying prisoners the minimum wage shouldn't be seen as an act of charity. It will take pressure off of working-class American laborers, encourage governments to reduce mass incarceration, and move the country back toward valuing free labor.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

To contact the author of this story: Noah Smith at nsmith150@bloomberg.net.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net.

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.