THE 13th Amendment to the constitution has prohibited slavery and indentured servitude in America since 1865. The one exception is as “punishment for crime”. As a result, prisons use their inmates as forced labour to balance the books, particularly since private firms were allowed to hire them again in 1979. Last year around a third of America’s prison population of 2.3m worked.

Most of this labour is done for much less than the federal minimum wage of $7.25. According to the Prison Policy Imitative, an advocacy group, some prisoners working in industry earn as little as five cents an hour. Regular prison chores are unpaid in Alabama, Arkansas, Florida, Georgia, South Carolina and Texas. Many worry about the impact on local labour markets of undercutting free wage rates. But little research has been done to quantify this. A paper presented on April 6th at the Economic History Society’s annual conference at Keele University seeks to do exactly this.*

Michael Poyker of UCLA Anderson has collected data from American prisons and the labour markets in their surrounding counties between 1850 and 1950. Crunching the data, convict labour hit free workers with a double whammy. The introduction of convict labour in a county in 1870-1886 accounted for 16% slower growth in manufacturing wages in 1880-1900, 20% lower labour-force participation, and a smaller employment share in factories than there would otherwise have been. This is not only because free workers were directly replaced by prisoners. The remaining firms using local workers then replaced them with machinery to compete with other firms using convicts. Mr Poyker reckons that the use of prison labour resulted in 6% of the growth in patenting new technologies in industries that were affected.

Innovation helps the economy overall. But the gains are not shared equally. The owners of firms that used convicts benefited; poorer people lost out when competing with them. The paper finds that the greater a county’s exposure to convict labour in the 19th century, the lower the level of social mobility between generations, even as late as the 1980s. This is because there were fewer opportunities for less well-off workers.

Globalisation means that convicts stitching Victoria’s Secret bras compete as much with Chinese workers as with locals. But many make items, such as military uniforms, which by law still have to be made in America. As a result, Mr Poyker says, the crowding out of free labour by prisoners still occurs today. In 2012 Tennier Industries, an American military-clothing firm, fired 100 workers because it could not compete with rivals employing convicts.

Michael Poyker, “Economic consequences of the U.S. convict labour system” (2018).