The US prison system is a massive industry that impacts millions of lives each year. With over 2 million people incarcerated, prisons are big business in America. But how much money does the US prison system actually generate each year? The answer may surprise you.
The Scale of Mass Incarceration in America
The United States has the highest incarceration rate in the world. With just 5% of the world’s population, America houses 25% of the world’s prisoners. Since 1970, the number of people in US prisons has increased by over 500%. There are currently over 2 million people behind bars in America.
The reasons for mass incarceration are complex. Stricter sentencing laws were passed during the War on Drugs in the 1980s and 90s. Private prisons also incentivized high incarceration rates. Systemic racism and poverty are also huge factors. Whatever the reasons, the scale of incarceration has exploded into a multi-billion dollar industry.
State and Federal Prison Populations
The US prison system is made up of both state and federal prisons. State prisons hold about 1.3 million prisoners for crimes prosecuted under state laws. Federal prisons hold around 226,000 prisoners for federal offenses.
Most state prison populations have declined modestly in recent years. But the federal prison population increased over 800% from 1980 to 2020. Tough-on-crime policies continue to drive high incarceration rates federally.
Jail Populations
Jails are different than prisons. Prisons hold convicted criminals with sentences over 1 year. Jails detain people awaiting trial or serving short sentences. There are around 740,000 people in US jails, most in local city or county jails.
Like prisons, jail populations exploded during the War on Drugs. Today, nearly one third of people in jail have not been convicted and are legally innocent. Many simply cannot afford cash bail while awaiting trial.
The Economics of Mass Incarceration
With millions of prisoners and detainees, the US prison system has also become hugely profitable. Let’s look at some of the industries and economic impacts fueled by mass incarceration.
Prison Labor
Prison labor is a multi-billion dollar industry. Many prisons contract prisoner labor to private companies. Inmates reportedly make between $0.23 and $1.15 per hour. They work in manufacturing, telemarketing, packaging, and other industries.
The total value of prison labor is estimated at $2 billion per year. Major corporations like Starbucks, Microsoft, Boeing, and Victoria’s Secret have profited from inexpensive prisoner labor. With millions behind bars, companies have access to a huge labor pool.
Prison Phone Calls and Commissary
Prisons charge exceedingly high rates for phone calls and commissary items. A 15-minute call can cost up to $24.95. Prices for food, hygiene products, and other items are also inflated.
These industries generate huge revenues. The prison phone industry alone is estimated at $1.4 billion per year. Companies like Securus Technologies have become massively profitable from prison phone service contracts.
For-Profit Prisons
Private, for-profit prisons are paid by government contracts to house inmates. The two largest companies are CoreCivic and GEO Group, worth a combined $4 billion. Their business models depend on keeping a consistent and large prison population.
Around 128,000 inmates are housed in private prisons. The companies save costs by keeping staffing and healthcare to a minimum. But contracts with state governments guarantee profits even if prison beds sit empty.
Prison Construction
New prison construction is costing states billions. California budgeted over $7 billion from 2007-2017 to build more prisons. Many were never completed or sat largely empty due to court-ordered population caps. But prison construction is hugely profitable for contractors.
As newer facilities are built, prison operators also push for new minimum occupancy contracts. These guarantee payment for a certain number of filled beds per month. They provide incentives to keep prisons full.
Collateral Consequences of Mass Incarceration
Beyond direct economic impacts, the prison system also fuels collateral industries and impacts the wider economy. Housing, healthcare, and foster care systems are all affected by incarceration rates.
Impact on Families
Families of the incarcerated suffer hugely, especially financially. Most prisoners were contributing to household incomes before incarceration. Remaining family members lose this income but have to pay additional costs like legal fees.
Children of incarcerated parents are also more likely to end up in foster care. This increases strain on the foster care system. The family impacts ripple across generations and communities.
Prisoner Health Care Costs
Taxpayers bear the high costs of prisoner healthcare. These include mental health treatment, medication, and care for aging prisoners. Per prisoner expenditures can exceed average American healthcare spending.
Many prisoners also suffer from chronic health conditions. This strains the wider healthcare system. Former inmates qualify for Medicaid but tend to have high medical needs. Incarceration undermines public health.
Housing the Formerly Incarcerated
Finding housing is incredibly difficult with a criminal record. Landlords often discriminate against applicants with a record. Rental assistance programs also deny people with certain types of convictions.
Lack of housing contributes to recidivism and reincarceration. Former prisoners become trapped in a cycle without stable housing. This destabilization spills over into surrounding communities.
Loss of Labor and Tax Revenue
The economy loses productive labor with millions incarcerated. Prisoners are no longer able to work legal jobs and pay income taxes. This translates to an estimated GDP loss of up to $182 billion per year.
Communities with above average incarceration also lose tax revenues. Less sales tax and property tax revenues can mean fewer resources for schools, infrastructure, and public services.
Major Corporations Profiting from Prisons
With so many economic impacts, it’s no surprise that prisons have become highly profitable for private corporations. Let’s look at some of the major companies benefiting from the prison industry.
CoreCivic
CoreCivic is the largest private prison operator in the US. They manage over 50 prisons with up to 80,000 inmates. CoreCivic generates nearly $2 billion in annual revenues from government contracts.
The company spent over $1 million on lobbying between 2010-2018 alone. Their business model depends on securing generous per-prisoner agreements with federal and state agencies.
GEO Group
GEO Group is another massive private prison company operating 64 facilities across the US. They bring in $1.8 billion in annual revenues housing over 50,000 inmates.
GEO Group spends heavily on lobbying. They have contributed to members of Congress including Marco Rubio, Adam Putnam, and Rick Scott. Their political influence is aimed at maintaining policies leading to high incarceration rates.
Telmate
Telmate controls communications and payment systems for prisons nationwide. They bring in $160 million per year from prison phone calls and digital payments. Telmate charges up to $30 for a 15 minute phone call – over 20 times normal rates.
The company also faces criticism for recording privileged attorney-client phone calls, impacting inmates’ 6th Amendment rights. But their entrenched monopoly in prisons has largely avoided regulation.
Keefe Group
Keefe Group is the largest supplier of commissary items and care packages to prisons around the country. It brings in $1 billion annually from marked up prices on goods like ramen noodles, candy bars, and hygiene products.
Keefe has faced lawsuits over kickback schemes with prisons who award them monopoly contracts. But the commissary business remains hugely profitable on the backs of prisoners with few other shopping options.
Lost Potential to Rehabilitate
With so much money being extracted from the prison system, many argue its potential to actually rehabilitate and reform prisoners is being lost. The following quote from prison reform advocate Ron Nikola captures this sentiment:
“We have built a massive criminal justice system that is self-perpetuating, where incarceration has become big business. Billions in revenue streams are based on keeping prison beds filled. Yet we spend too little helping incarcerated citizens build skills for re-entry and be productive members of society again.”
Prioritizing rehabilitation and community reintegration would reduce recidivism and cut down on future incarceration. But many industries profit from keeping large incarcerated populations. Meaningful reform remains elusive.
Notable Convictions and Prison Sentences
Prisons house inmates convicted of every crime imaginable. Some high profile convictions that contributed to prison industry profits include:
| Name | Crime | Sentence |
|---|---|---|
| Bernard Madoff | Ponzi scheme fraud | 150 years in prison |
| Ted Kaczynski | Unabomber domestic terror campaign | Life in prison |
| John Gotti | Organized crime boss | Life in prison |
| El Chapo | Drug trafficking kingpin | Life plus 30 years |
| Larry Nassar | Sexual abuse of over 250 female gymnasts | 60 years in prison |
These famous defendants generated massive media attention and public fascination. But every day, thousands more anonymous Americans enter the prison system that profits from their incarceration.
Frequently Asked Questions
How much money is spent on prisons each year in the US?
Total spending on prisons in the US has reached over $80 billion per year. About $34 billion is spent on state prison budgets, with another $31 billion on policing and courts. The federal Bureau of Prisons budget is around $8 billion annually.
What industries profit the most from mass incarceration?
Private prison operators like CoreCivic and GEO Group profit billions from government contracts. Prison labor is a multi-billion dollar business for corporations seeking cheap inmate labor. Telecoms like Telmate generate huge revenues from prison phone calls and commissary providers like Keefe Group also see billions in profits.
Do private prisons increase incarceration rates?
Research shows that privatization of prisons contributes to higher incarceration rates. Private prisons make more money when more prison beds are filled. They lobby politicians to support laws and policies that will maintain high prison populations.
Are prisons at full capacity?
Prison overcrowding used to be a massive problem, especially in the 1980s and 90s during the War on Drugs. But state prison populations have declined modestly in the last 10+ years. The average overcrowding rate is around 100%, but many prisons operate below max capacity.
What percentage of prisoners are in private prisons?
Around 8% of prisoners at the state level are housed in private prisons. This amounts to about 115,000 inmates. The percentage is higher at 16% for federal prisons, with around 27,000 inmates in private facilities. Overall, over 140,000 US prisoners are currently housed in private prisons.
Conclusion
The scale of mass incarceration has made prisons hugely profitable for a range of industries. Billions in revenue are made off the labor of inmates, phone calls with loved ones, marked up commissary items, and government contracts. Lobbying ensures laws favor high incarceration rates.
Meaningful reform will require pushing back on the prison industrial complex and realigning incentives. The goal should be reducing recidivism and helping former prisoners integrate back into society as productive members. With reformation of the system, the current level of incarceration and wasted lives can be reduced while increasing public safety.
But this will mean major industries will lose billions in easy profits. There are powerful interests benefitting from keeping prisons full. Only sustained public pressure and advocacy can start to change the system. With work, the current crisis of mass incarceration can be reversed and the perverse profit motives behind it reined in. The potential to rehabilitate lives hangs in the balance.