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...prisoners work cheap-to-free, and the entry of prison labour (or other cheap-to-free labour, such as workfare or heavily subsidized 'job creation' programmes) into a sector tends to drive the existing employees out of work and drive wages down. After all, if you can get indentured servitude, why do you need actual employees?
I was in a situation similar to this once, when I was in a workfare program. While there, you're not physically incarcerated, but you are similarly compelled to do whatever it is the authority figures at the top want you to, because otherwise they'll cut off your cheques, and then you'll be truly broke and homeless, barring a miraculous job appearance. While they claim that participation is "optional," the option is sort of like no option at all. I also had an experience where a business owner intended to hire me on an extreme subsidy (they would have had to pay about $2/hr for me), and fire the guy who was already doing the job for $15/hr. That's just not right.
The situation would be different if participation were strictly voluntary, but where you get into any situation involving incarceration, economic blackmail, or other forms of duress (overt or covert), then you're immediately talking A Bad Thing, period, end of story.
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