A Sweatshop Behind Bars: The nation's prison industry now employs more people than any Fortune 500 corporation except General Motors

The nation's prison industry now employs more people than any Fortune 500 corporation except General Motors. Is prison labor rehab or corporate slavery?

If you think prison inmates only make license plates, you're behind the times.

As a child Ayana Cole dreamed of becoming a world class fashion designer. Today she is among hundreds of inmates crowded in an Oregon prison factory cranking out designer jeans. For her labor she is paid 45 cents an hour. At a chic Beverly Hills boutique some of the beaded creations carry a $350 price tag. In fact the jeans labeled "Prison Blues" -- proved so popular last year that prison factories couldn't keep up with demand.

At a San Diego private-run prison factory Donovan Thomas earns 21 cents an hour manufacturing office equipment used in some of LA's plushest office towers. In Chino Gary's prison sewn T-shirts are a fashion hit.

Hundreds of prison generated products end up attached to trendy and nationally known labels like No Fear, Lee Jeans, Trinidad Tees, and other well known U.S. companies. After deductions, many prisoners like Cole and Thomas earn about $60 for an entire month of nine-hour days. In short, hiring out prisoners has become big business. And it's booming.

At CMT Blues housed at the Maximum Security Richard J. Donovan State Correctional Facility outside San Diego, the highly prized jobs pay minimum wage. Less than half goes into the inmates' pockets. The rest is siphoned off to reimburse the state for the cost of their incarceration and to a victim restitution fund.

The California Department of Corrections and CMT Blues owner Pierre Sleiman say they are providing inmates with job skills, a work ethic and income. In addition, he says prisoners offer the ultimate in a flexible and dependable work force. "If I lay them off for a week," said Sleiman, referring to his workers, "I don't have to worry about someone else coming and saying, ‘Come work for me.' "

For the tycoons who have invested in the prison industry, it has been like finding a pot of gold. They don't have to worry about strikes or paying unemployment, health or worker's comp insurance, vacation or comp time. All of their workers are full time, and never arrive late or are absent because of family problems; moreover, if prisoners refuse to work, they are moved to disciplinary housing and lose canteen privileges. Most importantly, they lose "good time" credit that reduces their sentence.

Today, there are over 2 million people incarcerated in the U.S., more than any other industrialized country. They are disproportionately African-American and Latino. The nation's prison industry now employees nearly three quarters of a million people, more than any Fortune 500 corporation, other than General Motors. Mushrooming construction has turned the industry into the main employer in scores of depressed cities and towns. A host of firms are profiting from private prisons, prison labor and services like transportation, farming and manufacturing.

Critics argue that inmate labor is both a potential human rights abuse and a threat to workers outside prison walls claiming, inmates have no bargaining power, are easily exploited and once released are frequently barred from gainful employment because of a felony conviction.

In one California lawsuit, for example, two prisoners have sued both their employer and the prison, saying they were put in solitary confinement after refusing to labor in unsafe working conditions. In a nutshell John Fleckner of Operation Prison Reform labels the growing trend "capitalist punishment -- slavery re-envisioned."

The prison industry is not a new phenomenon, writes Fleckner. He says mixing the profit motive with punishment only invites abuse reminiscent of one of the ugliest chapters in U.S. history. "Under a regime where more bodies equal more profits prisons take one big step closer to their historical ancestor, the slave pen."

In fact, prison labor has its roots in slavery. Following reconstruction, former Confederate Democrats instituted "convict leasing." Black inmates, mostly freed slaves convicted of petty theft, were rented out to do everything from picking cotton to building railroads. In Mississippi, a huge farm, resembling a slave plantation replaced convict leasing. The infamous Parchman Farm was not closed until 1972, when inmates brought suit against the abusive conditions in federal court.

Prison analysts say contract prison labor is poised to become one of America's most important growth industries. Many of these prisoners are serving time for non-violent crimes. With the use of tough-on-crime mandatory sentencing laws, the prison population is bursting at the seams. Some experts believe that the number of people locked up in the U.S. could double in the next 10 years. According to Prison Watch, the expansion of the number of prisoners will not only increase the pool of prison labor available for commercial profit, but also will help pay the costs of incarceration.

"The main goal of prison work programs is to provide "a positive outlet to help inmates productively use their time and energies. Another goal is to instill good work habits, including appropriate job behavior and time management, according to the Joint Venture Program of the California Department of Corrections. The program is responsible for contracting out convict labor to governments, businesses and non-profit organizations.

Federal law prohibits domestic commerce in prison-made goods unless inmates are paid "prevailing wages" but because the law doesn't apply to exports, prison officials routinely market to foreign customers.

In California the prisons themselves are their own best customers. The California Department of Corrections purchases about half of what the prisons make, choosing from an online Prison Industry Authority catalog.

Prisoners now manufacture everything from blue jeans, to auto parts, to electronics and furniture. Honda has paid inmates $2 an hour for doing the same work an auto worker would get paid $20 to $30 an hour to do. Konica has used prisoners to repair copiers for less than 50 cents an hour. Toys ‘R' Us once used prisoners to restock shelves, and Microsoft to pack and ship software. Clothing made in California and Oregon prisons competes so successfully with apparel made in Latin America and Asia that it is exported to other countries.

In most states prisoners receive little of the money they earn working either for state-run or private sector corrections firms such as the Corrections Corporations of America (CCA) and Wackenhut. The labor prisoners perform is often considerably cheaper than in the outside world. Case in point, Texas-based Lockhart Technologies closed its Austin plant and fired some 150 workers who constructed circuit boards because it could relocate those jobs to a Wackenhut-run prison where detainees did the work for minimum wage.

But even with the low pay and potential for abuse, the labor programs are popular with prisoners, says California Prison Watch, which monitors the state's prisons. "Prisoner idle time is less, they earn spending money, and they can pick up a skill."

Tony Matos, 45 convicted of robbing a Rialto liquor store says, "When we step through the gates and into the shop, it's another world. This is a company. This isn't prison. Guards still keep watch, the capitalists still profit -- the critics and supporters still debate. But in the end, I get a skill, a few coins and a ray of hope and dignity."