US Prison Industry Benefits from Immigration Reform

US Prison Industry Benefits from Immigration Reform

U.S. Attorney General Eric Holder recently announced a plan to reduce the U.S. prison population by reforming the prosecution of low-level drug offenses. America has the highest incarceration rate in the world with 25% of the world’s prison population in the U.S. Holder’s move is partly inspired by budgetary considerations to constrain the soaring cost of prisons, estimated to be $80 billion annually.

However, while roughly half of federal prisoners are currently held for drug-related offenses, much of the new growth in incarceration stems from detention of undocumented immigrants.

At an annual cost of around $35,000 per inmate, a major burden for taxpayers is also an enormous source of revenue for America’s private prison industry. The industry leaders, Corrections Corporation of America (CCA) and GEO Group currently have a 75% market share of private prison revenue, which totalled more than $3 billion last year. The future profitability of these companies depends on the political direction of two legislative battles: drug policy reform and immigration reform.

CCA and GEO Group, aware that their revenue stream is closely tied policy decisions, spent nearly $1.5 million to influence races in the 2012 election cycle. The most recent version of an immigration reform bill promised to add 14,000 immigrants to detention camps at a cost of $1.6 billion. The Wall Street Journal estimated 80% of that expenditure would go to private prison companies.

CCA already runs a network of these facilities that generated $206 million from Immigration and Customs Enforcement contracts in 2012. However, the present version of the immigration reform bill appears unlikely to pass in the near future.

Aside from government contracts, the industry also relies on prisoner labor as a source of revenue. The state-owned Federal Prison Industries (FPI) currently employs 13,000 inmates in 83 federal prisons. FPI is present in a range of sectors from manufacturing military apparel to operating a call center. FPI pays incarcerated workers between $.23 and $1.15 per hour and therefore enjoys a major competitive advantage over firms that employ voluntary labor.

CCA currently uses prison labor to run and maintain its facilities, and in immigrant detention centers manages to keep labor costs to $1 per day for each worker. The industry faces a regulatory question as to whether detained migrants can be used for more lucrative forms of production on the model of FPI.

Currently, 50% of the inmates in privately operated facilities are detained immigrants. That number is expected to rise if reforms continue in their present form. The future profitability of CCA, GEO Group and the rest of the private prison industry depends on a combination of forestalling the reform of drug laws that keep many Americans incarcerated and steering the future of immigration reform to maximize immigrant detention.

Categories: North America, Politics

About Author

Michael Madoff

Michael works in Washington, DC as an information technology consultant focused on the public sector. He graduated cum laude from Georgetown University's School of Foreign Service with a degree in International Politics. Michael is primarily interested in the impact of emerging technologies on political and economic interactions.