Prison Labor: Outsourcing's "Best Kept Secret"

Since 1999, private corporations in the U.S. have outsourced a variety of business services to federal prison inmates, who today earn around $1 an hour for call center work. Proponents of the practice claim prison labor is a low-cost alternative to offshore outsourcing, but critics say it takes jobs away from law-abiding U.S. citizens.

By Stephanie Overby
Thu, May 27, 2010

CIO — When word spread earlier this month that an Indian IT services company planned to set up a 200-person business process outsourcing unit in an Andhra Pradesh jail , it wasn't long before the snark began flying. Are captive centers on the rebound? Imagine the low attrition rates! Inmates working for banks—what could possibly go wrong?

When Phil Fersht, founder of outsourcing analyst firm Horses for Sources, first heard about it, he says, "I thought it was a joke."

Meanwhile, in the U.S., prisoners have been handling a variety of business services for private corporations since 1999. In 2002, they began taking on call center work. Nearly 1,100 inmates locked up in eight federal prisons from Dublin, Calif. to Morgantown, West Va. man tier-one help desks, handle outbound business-to-business calls, and provide directory assistance for Federal Prison Industries (FPI).

For private sector customers outsourcing their call centers to FPI, which operates under the trade name UNICOR, the price is right. Employees behind bars earn an average of 92 cents an hour to man the phones.

UNICOR says prison labor is a low-cost alternative to offshore outsourcing. Its customers either want to repatriate work previously done in India or another low-cost locale, or contract with UNICOR in lieu of an offshore provider, says UNICOR Public Information Officer Julie Rozier.

Callers are unaware that the person on the other end of the line is in jail, says Rozier. And the call center workers, nearly 90 percent of whom are female (male prisoners tend not to volunteer for phone work, according to Rozier), do not deal with any personal identifying information or classified data about the customers they're servicing.

UNICOR bills its services business group, which also provides distribution and order fulfillment, document conversion, and printing and design services, as "the best kept secret in outsourcing."

It's no wonder: Few non-government customers go public about outsourcing to prison inmates. Moreover, contracts with UNICOR for call center work today include non-disclosure clauses to protect clients' identities, says Rozier.

From Chain Gangs to Call Centers

Call centers are a far cry from chain gangs, but putting prisoners to work is not a new practice. In fact, FPI was established in 1934 under President Franklin D. Roosevelt to manufacture goods for the government. But it was only in 1999 that it was given the authority to sell services to private corporations.

The program has riled some labor unions and industry groups over the years. The U.S. Chamber of Commerce, for example, has complained that UNICOR has an unfair competitive advantage over its private sector members in winning government contracts. The AFL-CIO has argued against the widespread use of prison labor because, the union says, it takes jobs away from Americans on the outside.

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