4 Ways the Prison Industry Affects Your Everyday Life

2.3 million people are currently incarcerated in the United States, more than any other country in the world and up 500% in the last 30 years. 60% (almost 2 out of 3!!) of people in prison are people of color.

But stats are just stats. How does this actually affect your everyday life?

1. Your taxpayer dollars are going to private companies to build prisons. That’s right. Private companies are creating contracts with the state governments and the federal government to build and operate prisons. There were only 5 privately owned businesses a decade ago. Today there are 100. Not only that, these contracts between the government and the private company often include a clause that guarantees between 80-100% occupancy.

WHAT??

The government (meaning you!) gets charged by the private company if they DON’T put “enough” people away?? So this explains why crime rates have been going down for the last 30 years and the prison population has been going up, to the tune of a 700% increase in population size since 1972. The Corrections Corporation of America has seen its profits grow at about the same rate – about 500% growth in the last 20 years.

So basically, your tax dollars are going to a private company who has made a deal with the government that all the beds they make will be filled by prisoners. Yeah.

2. If you don’t know someone in prison, you probably know someone who knows someone in prison. No Kevin Bacon degrees of separate here. 2.3 million people in prison means that 1 out of every 107 people in the US are currently behind bars, so if you don’t personally know someone who’s doing time, someone you know is being affected by this.

Hold on. It gets worse. One of out every 28 kids in the US has a parent in prison. Here’s some perspective for you – that means at least one kid in every classroom in America and let’s just say some classrooms have a higher average than others.

prisonindustry3. You could be speaking to a prisoner when you call a company’s customer service number. 47 companies have been identified by buycott.com, including Victoria’s Secret, Microsoft, McDonald’s, Walmart, and Costco, as using prison labor for part of their operations – from sewing clothes to packing electronics to handling food. Some clever a-hole decided to coin the term “insourcing” to describe it. Whatever side of the fence you’re on about outsourcing, the same sh*t is happening in our prisons and we’re paying for the beds.

Companies like American Airlines, Avis, Sprint, and Verizon have used prisoners in their call centers. Think about the kind of information you give to someone over the phone when you call customer service.

Speaking of who’s paying for the beds, in 1979, Congress passed the Prison Industry Enhancement Certification Program (PIE), which incentivized businesses to employ inmates. They had certain conditions in place, like that the workers were required to get paid an equal amount to a non-imprisoned employee. Unfortunately, before the prison worker saw their check, a few deductions would be made, for things like taxes and room and board. How many times can we pay for one bed?

4. Your investment portfolio probably has a publicly traded prison company in it. The Corrections Corporation of America is very confident in their ability to expand and grow. From their 2008 annual shareholder letter:

With the U.S. population estimated to grow by more than 18.5 million between 2007 and 2015, about 20,000 prisoners per year will be added to the system over the next seven years if historical trends in incarceration rates continue. In addition to new prisoners generated through growth in our nation’s population, high recidivism rates will also contribute to increased demand for prison beds.

So not only are they expecting the prison population to increase, they’re also figuring people will be coming right on back. These kinds of numbers almost feel like a guarantee for investors that they’ll make a profit.

And in 2013, the Corrections Corporation of America and the GEO Group, the two largest publicly traded companies, were granted permission by the IRS to convert the structure of their real estate holdings into Real Estate Investment Trusts, or REITs (detailed in a disgustingly titled article by Investopia called “Crime Pays for REIT Investors”). Publicly traded REITs give the average investor the ability to invest in commercial real estate and big apartment buildings and participate in the ups and downs of the real estate market while still being able to sell it as a stock whenever they want.

The other cool thing about REITs are the major tax advantages for the entity, namely that if they distribute 90% or more of their profits to their investors in the form of dividends, they don’t have to pay income tax. So investors get a big dividend payout at the end of the year and the company only pays corporate taxes.

This is why the Corrections Corporation of America is a great stock to add to any portfolio or index fund, which many ETF’s already do. If you have a mid-cap allocation, a multi-asset/balance fund, or a real estate/REIT allocation in your portfolio, you could be the proud shareholder of CXW and you didn’t even know it!

Crime pays right?

Brunch & Budget on Bondfire Radio is doing a 4 part series on the prison industrial complex and how it affects your daily life. Listen to the first episode here.

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