The prison system in the United States has become big business. With over 2 million people incarcerated, prisons are now being run more like corporations, with a focus on profits over rehabilitation. But how much money does the prison system actually generate? In this comprehensive article, we’ll analyze the economics of incarceration and examine exactly how much money is being made off prisoners.
The Growth of the Prison Population
Over the last 40 years, the prison population in America has absolutely exploded. Consider these statistics:
- In 1980, there were about 500,000 people in prison or jail nationwide. Today, there are over 2.2 million incarcerated. That’s more than a 300% increase.
- The United States has less than 5% of the world’s population but over 20% of the world’s prison population.
- 1 in 3 black men in America will spend time in prison at some point in their lives.
This huge rise in incarceration is due to stricter sentencing laws like mandatory minimums, the War on Drugs, and policies like “Three Strikes.” Prison has essentially become big business in America. Let’s look at how much money is generated.
The Prison Industry Generates Billions in Revenue
The American prison system has become a major industry. Everything from construction of prisons, to food services, healthcare, commissary, phone calls, and more generate massive revenues. Consider:
- The prison industry generates over $80 billion in revenue annually.
- Private companies that provide services to prisons bring in over $40 billion per year.
- The industry has seen growth of over 500% in the last 2 decades alone.
- State prisons alone spent over $8.1 billion on contracts with private companies in 2019.
With so many people incarcerated, prisons have become ripe for profit-seeking companies. But prisoners themselves are exploited for cheap labor.
Prison Labor Brings in Billions for Corporations
Inside prisons, incarcerated people are put to work for extremely low wages. These prison labor programs generate enormous profits for major corporations. For example:
- UNICOR, a government-owned corporation, used over 12,000 prisoners for manufacturing last year. Their prison labor generated over $500 million in sales.
- Whole Foods, Walmart, AT&T, Victoria’s Secret, and many more all use prison labor to make products. They pay only $2 per hour or less.
- Prisoners fighting California wildfires get just $1 per hour plus $2 per day. Regular firefighters make over $40,000 a year.
- American prisoners produce over $11 billion worth of goods and services per year nearly for free.
Prison labor is hugely profitable for private companies, while prisoners make just pennies. But the revenues don’t stop there.
Fees and Fines on Prisoners Generate Billions More
In addition to cheap labor, prisoners are charged various fees that maximize revenues:
- Phone calls from prison generate $1.2 billion per year from expensive collect calls paid by families. Some states charge over $1 per minute.
- Commissary sales mark up basic food and hygiene items by 43% to 58% generating $1.6 billion in profits.
- Many states charge prisoners “room and board fees” to stay in a cell, costing up to $2000 per year.
- Prisoners are often saddled with fines and fees like mandatory drug tests for parole that can total hundreds per month.
Billions more dollars are extracted from prisoners and their families through these fees that some call “punishment taxes.” On top of it all, many prisons profit from inmate healthcare.
For-Profit Healthcare in Prisons is a Multi-Billion Industry
Providing minimal healthcare is constitutionally mandatory in prisons. But prison healthcare has largely been privatized and turned into a hugely profitable industry:
- The 2 largest for-profit prison healthcare companies, Corizon Health and Wellpath, have annual revenues of $3.5 billion.
- Many states pay a daily fee per inmate to providers like Corizon that can add up to over $27,000 per inmate annually.
- Yet these companies routinely deny treatment to cut costs, causing “needless pain and suffering”, according to experts.
In total, outsourced prison healthcare funnels billions to specialty providers. Incarceration has given rise to an entire industry with revenues in the hundreds of billions.
Major Corporations Profit from Prison Privatization
All together, private companies are making huge profits off mass incarceration:
- The two largest private prison companies, GEO Group and CoreCivic, generate over $4 billion in annual revenue.
- These companies get guaranteed, lucrative contracts with states that promise high occupancy rates in prisons.
- They’ve spent $25 million on lobbying over the past decade to push for harsher sentencing to fill cells.
Along with other prison service contractors and vendors, public prisons have become a multi-billion dollar business in every way. Ultimately, taxpayers foot the bill.
Taxpayers Spend Over $80 Billion Per Year on Prisons
With all the revenue generated in the prison industry, who is ultimately paying for it? Taxpayers. Here’s a breakdown of the prison system’s economic toll on American taxpayers:
- Federal spending on incarceration totals over $7 billion per year today. State spending accounts for over $70 billion for prisons.
- The average cost to house an inmate is over $30,000 per year. In some states like California or New York, it’s nearly $70,000 per prisoner annually.
- Nearly 1 in every $14 dollars of state general funds goes to the prison system.
- Extra costs like healthcare, infrastructure, police, and courts add tens of billions more in annual public spending.
Mass incarceration puts a massive strain on government budgets and pulls funding away from other needs like education and infrastructure. But there are alternate solutions.
Reduced Incarceration Could Save Taxpayers Billions
Experts argue that reducing prison populations through reforms could greatly benefit taxpayers:
- Cutting inmate populations by just 50% could save states $16.9 billion per year without impacting public safety, research shows.
- Investing more in community supervision, prevention programs, and mental health resources instead could significantly lower crime rates.
- Ending the War on Drugs and mandatory minimum sentences for non-violent offenses alone could reduce prisoner counts by hundreds of thousands.
- Some states like New York that have reduced incarceration rates have already saved billions.
Rather than waste so much public money locking up millions, many argue that we need smarter justice reform. This may be the only way to reverse the runaway economics of mass incarceration.
Key Events and Profiteering from Prison Labor
| Year | Event | Company Profiting |
|---|---|---|
| 1976 | Congress passed a law lifting restrictions on prison labor, allowing private companies to capitalize off inmates. | UNICOR, Federal Prison Industries |
| 1993 | ACircuit City subcontractor began using prison labor to recycle electronics equipment at $.25/hour. | Circuit City Stores Inc. |
| 1995 | Kmart Corporation used prison labor to sew Victoria’s Secret lingerie in New Mexico. | Kmart, Victoria’s Secret |
| 2001 | A surge of prison labor was used in government call centersFIELDEX FIELDEX as telemarketing for corporate clients. | Regional Correctional Facility (Tx) |
| 2008 | Whole Foods was criticized for using prison labor to farm tilapia and produce. Inmates made $2/day. | Whole Foods Market |
| 2010 | BP hired Louisiana prison inmates to clean up the Gulf oil spill at less than $2/hour. | BP |
| 2018 | Inmate firefighters who worked the California wildfires were paid only $1 per hour. | California Department of Corrections |
Frequently Asked Questions
How did the US prison population grow so large?
The prison population grew over 500% since the 1980s due to stricter sentencing policies like mandatory minimums, Three Strikes laws, and the War on Drugs. These laws incarcerated more people and for longer periods.
What is the average cost to house an inmate for a year?
The average cost to house an inmate for a year is over $30,000 nationwide. For high-cost states like California or New York, the annual cost per inmate can exceed $60,000-70,000 per year.
Do private companies benefit from mass incarceration?
Absolutely. Billions in revenues and profits are made by private prison companies, companies that use prison labor, and contractors that provide prison services like healthcare and food.
How much money can prisons generate from fees and fines on inmates?
Prisons charge fees that total billions per year: phone calls ($1.2 billion), commissary markups ($1.6 billion), room and board fees ($2 billion), and more. This amounts to “punishment taxes.”
What percentage of state budgets go to prison spending?
Roughly 1 out of every 14 dollars in state general fund spending goes to prisons and incarceration costs according to estimates. In some states, it is much higher.
Conclusion
Incarceration in America has become a multi-billion dollar industry. From exploiting prison labor, to marking up basic services, to privatized healthcare systems, prisons generate massive revenues. At the same time, they put a huge financial burden on taxpayers and government budgets.
However, research shows that by reducing incarceration and implementing reforms, billions could be saved while improving public safety. Ultimately, the economics of prisons have become more focused on profit than rehabilitation. Rethinking this system is crucial to creating a more just and equitable society.