Jailhouse Capitalism Stirs Revolt

Tom Tabaska, a manager at John Deere & Co., had never walked a picket line in his life. But last month he was out on a street in Milwaukee, Wis., with members of the local machinists union. Their common pique: a plan to use federal prisoners to make lawn mowers. "How often can labor and management be on the same side?" he asks. "No way was I going to pass up this."

Across the country, business and labor are uniting to fight the growing use of inmates to make everything from guided missile parts to bedroom furniture.

With a boom in the federal prison population, administrators in Washington are looking for ways to expand the amount of capitalism behind bars. But unions worry about competition from cheap labor, while businesses see a loss of valuable federal contracts: By law, the government must give priority in purchasing to prison-produced goods.

The result is a growing clash over a fundamental issue: Do prison-industry programs provide invaluable rehabilitation for inmates? Or do they take away too many jobs from law-abiding Americans?

"It was not a problem until we started getting more and more prisoners," says Brad Miller of the Business and Institutional Furniture Manufacturers Association (BIFMA) in Grand Rapids, Mich. "But with 100 prison factories ramping up production and telling government agencies they have to take their products, a lot of folks have gotten concerned."

Certainly, prison-industry programs have changed from the days when inmates simply stamped out gun-metal-gray desks. Some 20,000 federal inmates now produce 150 different products - everything from bullet-proof vests to rebuilt Humvee engines to swimsuits. Prison wages - called gratuities by officials - range from 23 cents per hour to $1.15 per hour. Inmates are required to put 50 percent of their income toward a victims' fund, fines, and child support.

Using this labor pool, the Federal Prison Industries (FPI) has become the 37th largest supplier to the federal government. It had sales in 1996 of $495 million.

The prospect of even more goods being built behind bars is stirring concern on Capitol Hill. Rep. Peter Hoekstra (R) of Michigan has joined 80 others in sponsoring legislation that would force FPI to bid against the private sector for government business. The legislation is backed by an unusual coalition of liberals and conservatives. It's also supported by the US Chamber of Commerce and the AFL-CIO. "We are real concerned that FPI is going to expand as the prison population expands, so we think it's inevitable that all members' districts will get hit," says Chris LaGrand, an aide to Mr. Hoekstra.

This year, the legislation didn't go anywhere because of opposition from Rep. Bill McCollum (R) of Florida, chairman of the House Judiciary Subcommittee on Crime. He and others see prison-labor programs as invaluable in cutting the repeat offender rate. Currently, as many as 60 percent of all inmates end up back in prison. The rate is 20 percent lower for those who work. About 25 percent of all federal inmates work.

Mr. McCollum has drafted his own legislation, which would make FPI compete for government business but also for private contracts. McCollum wants to let companies bid for the right to set up enterprises in prisons. "The private sector should propose and manage the system as opposed to the government doing it," he says.

That's what has brought Mr. Tabaska and union members out on the picket line. For the first time last month, FPI asked businesses to propose new products that could be made in prisons. One came from Brillion, Wis.-based Ariens Co., which suggested lawn mowers.

"Ariens is not doing this to be nice to a rapist," says Rich Michalski of the International Association of Machinists. "They're doing it for profit."

BUT company president Daniel Ariens responds that his firm is using American labor and training people. "We are reducing the taxpayers' cost and offering the opportunity to be rehabilitated," he says, calling the plan "simple and small."

The proposal has upset both unions and companies in the lawn-care business. Ken Golden, a spokesman for Deere, estimates the government buys about $20 million a year of wheeled garden equipment. In a letter to FPI, Deere says its strategy in recent years has included more government sales.

FPI pooh-poohs the criticism. "We ask for a percentage of that market, not 100 percent," says Steve Schwalb, chief operating officer.

The reaction by Deere illustrates the problem Mr. Schwalb has in finding niches that don't hurt the private sector. For example, FPI has earned the enmity of the furniture industry because it now produces $187 million worth of credenzas, work stations, and chairs. BIFMA has founded a business coalition to fight the prison-industry program.

Most businesses competing with FPI for government contracts complain about the low wages and absence of benefits for inmate workers - something they can't match. Yet prison-industry officials point out they have shortcomings, too: Schwalb says factories behind bars can't really compete with the private sector since it takes four inmates to do the job of one person using modern equipment.

To stem the criticism, Schwalb is now looking at expanding into areas that won't hurt US businesses. For example, many companies are now sending data-entry tasks to low-wage countries. Thus, a state prison in Florida is doing data processing for a commercial mapmaker that formerly shipped the work to India.

No matter where Schwalb takes FPI next, he will have to find a lot of new jobs. Over the next eight years, the government is slated to build 25 new penitentiaries with a population of 55,000. Providing jobs for 25 percent of them would mean creating 13,750 positions. "We want to do something so that when they are released from prison, they don't return to a life of crime," he says.

MADE IN USA PRISONS

So much for digging ditches. Inmates in about 100 federal prisons now make 150 different products for use by various government entities.

Total sales - $495.5 million (1996)

Net proceeds - $12.1 million (1996)

Prison wage scale - 23 cents to $1.15 an hour

A sampling of items supplied by Federal Prison Industries and their yearly sales:

* In Jessup, Ga., $5.3 million in swim trunks for use by West Point cadets and other military academies.

* In Loretto, Pa., and Fairton, N.J., $75 million in cable assemblies for tanks, jets, and missiles.

* In Bastrop, Texas, $16 million in flak jackets and bullet-proof vests for use by the military and Border Patrol agents.

* In Leavenworth, Kan., and three other facilities, $11.5 million in mail bags for US postal carriers.