82. Divesting from Prisons

Welcome back to Spend Donate Invest!

Today we are going to talk about a question that came in from a listener, it was about how to divest from prison labor. So we’re going to talk about what prison labor is and how it might be used to create the products that we buy and to address the listener’s question, how to divest from prison labor.

I am going to include a link to a report that I just really appreciated reading. It is called “Prison Labor in the United States and it was put out by Northstar Asset Management in 2018 and then it was updated in 2022. It is about 40 pages long, but you know how this podcast works, I always try to clearly and succinctly convey this information to you in case you’re just too busy to dig in yourself. But if you do have time, I will include the link to this report.

Right off the bat, the facts.

Prison labor is legal because of a loophole that was created when slavery was abolished in the United States. This is the 13th amendment that says slavery is allowed as punishment for a crime. This is the amendment that is the focus of the documentary called “13th” directed by Ava DuVernay.

This loophole was created as a gesture to those who were previously enriched by enslaving Africans. And then the loopholes were widened when the profits from prison labor started to roll in. The bar for what it took to be incarcerated were dramatically lowered. For example, in Mississippi, if you just were convicted with stealing something worth about $280 in today’s dollars, you were incarcerated and then put to work as prison labor. But that’s not just an olden times tactic, we’ve seen it in our lifetimes too, the lowering of the bar for what it takes to get incarcerated which is what feeds the prison labor machine. For the sake of time, I won’t go into the report’s very clear explanation of the tie between restricting immigration and increasing prison labor.

Given our capitalism above all else orientation as a country, it’s no surprise that America has one of the highest incarceration rates in the world. I have always read that America has THE highest known incarceration rate in the world, but then in researching this episode, I learned on the National Institute of Corrections, which is a federal government agency, that Seychelles has a slightly actually higher rate of incarceration than we do. I would be curious to know about prison labor in other countries with high incarceration rates. Here in the US, there are millions of people incarcerated and by and large, if they are able-bodied, they work.

They might be doing labor for the government or for private corporations. But they are working. They are not unionized, they often don’t have a choice about whether or not they will work,  but they are working. They might be paid pennies on the dollar or they might not be paid at all. The range of pay I read about in the report for one company that runs private prisons was 16 cents a day on the low end, up to 50 cents an hour on the high end. I will repeat that again, the range of pay for people incarcerated at this private prison, people who are picking crops, working in slaughterhouses, refurbishing furniture, creating electrical components, the pay ranges from 16 cents a day to the high end which is 50 cents an hour.

There is a very small portion of incarcerated people that are being paid minimum wage of $7.25 an hour, which is still too low, but we will do a separate episode on minimum wage if you want. But whether you are getting paid 16 cents a day or 50 cents an hour or $7.25/hour, some of your wages will be garnished. For your room and board in the prison, or other expenses like victim’s restitution etc etc.

One of the sinister things about this issue, there’s insufficient regulation and there’s no clear information and data about exactly what is being allowed in each state. What is going on is hidden behind prison walls.

Prison labor used to be advertised openly but nowadays it is a secret, most Americans aren’t aware and would be horrified to know the conditions that prisoners are working in to create our every day items. It’s hard to even know which companies are using prison labor, between suppliers and sub-suppliers and sub-sub-suppliers, there are many layers of secrecy. For example, old school plantation type of work, harvesting crops is prison labor. But if the crop is then processed by one supplier and then transformed into another ingredient by another supplier, by the time it ends up in a retail product, you and I will have no idea. And there have been cases where companies don’t know about the prison labor hidden in their own supply chains. I do believe that.

But we also know that companies who know they are using prison labor to create their products usually go to great lengths to hide that from us as consumers and investors. I had forgotten about this until I was reading Northstar report, but they mentioned the big scandal back in the 90s when it was revealed that Victoria’s Secret garments were being made by prisoners. And then I definitely wasn’t aware that Walmart had incarcerated people to build a distribution center for them. You might remember pre-Bezos Whole Foods back in 2015 when there was backlash about some food they were selling that was made with prison labor.

In the report there is a list of products that are believed to be made with prison labor. I’ll go through it quickly here:

Vidalia onions from Georgia • Watermelon from Arizona (using Colorado incarcerated workers) • Idaho potatoes • Washington state apples • Processed foods • Furniture such as desks, office chairs, dorm beds • Solar panels  • Clothing and footwear • Eyeglass lenses • Cleaning supplies

Dental laboratory products • Industrial materials, packaging, wiring, IT materials • Lumber • Tire re-treading and vehicle painting • Construction safety clothing • Fences, park benches and tables, and outdoor park signage and trash cans • Printing, mailing, and digital imaging services • Latex balloons • Call center services

Now, the logical next question is- which companies are selling products made with prison labor??? And the answer is, it’s a secret. It’s hard to know for sure. In the report, they do provide a link to a list of companies that are for some reason, super involved in this shady industry association that promotes the use of prison labor, but either they have taken it down or my computer was seriously blocking me. It’s on page 32 if you are listening to this at a later date, maybe the list of members will be available again.

I found another resource called Prison Free Funds, I was interested to see if there are index funds that are prison free, both in terms of having private prisons as well as prison labor involved companies, and it turns out someone has done this research for us! Actually they also include information about whether the company

So you can either take your index fund or mutual fund or ETF that you already have and look up what score it has on these issues. Or you can look to find an index or mutual fund or ETF that scores really well and you want to add to your portfolio. I will include the link in the show notes but that is prison free funds dot org.

So to recap:
Slavery is still legally allowed in America! The loophole is in the 13th Amendment, it says that slavery is allowed as a punishment for a crime.
Almost all incarcerated people are working. Many are not paid, some are paid a few cents an hour. A very small portion are paid minimum wage. That is, before their wages are garnished to pay for room & board and other expenses.
It is almost impossible to know which foods we eat and products we buy are being made with prison labor.
However, there are some index funds and mutual funds and ETFs that you can check out on prison free funds dot org. Or you can look up how well your current portfolio scores on these issues.

I know there are some personal finance experts that listen to the show, I want to point out page 12 of the report where there is information about the system of slave-based-securities that was created in America and purchased by Americans and Europeans. If you’re not a personal finance expert, you know how you can put your house down as collateral if you take out a loan? Well, apparently they used to do that with black Americans! You literally can’t make this stuff up.

Ok that’s it for today. If you have time, read the report y’all, it was such a good read. If you think a documentary film makes more sense for you, I mentioned 13th, directed by Ava DuVernay earlier.

Like all issues discussed on this show, let’s push for systemic change while doing what we can in the meantime.

Thank you to the listener who suggested this topic for this week. If there’s another topic you’d like to hear covered here on the show, please send an email to spend donate invest at gmail dot com. You can check out the website which has lots and lots of episodes the web address is spend donate invest dot world. If you’re feeling the vibe here on the show, please send an episode to someone who you think might enjoy it too. That’s the best way you can support!

That’s all for now, I hope you enjoyed today’s episode. Let’s talk again soon!

Links from today's episode:

Northstar Asset Management Report "Prison Labor in the United States: An Investor Perspective"
https://northstarasset.com/wp-content/uploads/2018/05/revMay2018_Prison-Labor-in-the-Supply-Chain.pdf

Prison Free Funds
https://prisonfreefunds.org/ 

Book reco: Mass Incarceration in the Age of Colorblindness by Michelle Alexander
https://newjimcrow.com/