The United States incarcerates more people than any other country in the world, with approximately 2.2 million inmates behind bars in state, federal and private prisons across the country. That’s over half a million more inmates than in China, whose population is four times the size.

The Beginning of the Modern Private Prison Industry

The sharp increase in incarceration levels can be traced back to the 1970s, when the government struggled to combat the nationwide issue of drug-use and crime. When President Nixon declared a war on drugs in 1971, it forced an increase in tough policies against crime across the country.

In the two decades following 1980, the incarceration rate more than tripled, which led to major overcrowding in jails across the country. To tackle this issue, many states turned to private companies to build or run their prisons.

The first modern private prison was built in Tennessee in 1984 by the Corrections Corporation of America (CCA). Its opening marked the first time that any state government had contracted out the full operation of a prison to a private corporation.

What began as a quick-fix solution to the overcrowding of public prisons, the for-profit prison sector now accounts for 10% of the corrections market with an annual turnover of $7.4 billion per year.

As of 2013, the US Department of Justice reported that 19.1% of the federal state prison population is housed in private prisons along with 6.8% of state prisoners. Today, there are over 130 for-profit prisons with 157,000 beds and this number is expected to reach 360,000 by 2026.

For-profit prisons are legal in 29 states across the country with some relying predominantly on private facilities to house their inmates. For example, nearly 44% of all New Mexico prisoners are held in private prisons, followed by 38.7% in Montana.

While the rate of violent crime in the United States has fallen by about 20% since 1991, the number of people in prison or jails has risen by 50%, as roughly 13 million people are sent to jails in any given year.

But how does that make sense?

Proponents against private prisons argue that the contracting of prisoners has created an economic incentive to put people behind and because of this, for-profit prisons rely on the incarceration of prisoners to keep their corporations afloat and their stockholders happy.

Private Industrial Complex

This complicated intersection of public and private interests is known as the “prison-industrial complex”. The term was created to explain the correlation between the rapid expansion of the United States’ inmate population and the influence of private prison companies that house and supply labor to government prison agencies.

The corporations who operate under this title include construction companies, surveillance technology providers, private probation companies, lobby groups, and even prison cafeteria vendors. This complex, however, has become highly controversial, as the economic and social implications of “contracting out” prisoners to private companies has placed the privatization of prisons at the forefront of American politics.

The prison-industry complex is one of the fastest growing industries in the United States, with private prisons accounting for the largest business in the group.

Why Support Private Prisons?  

 The main argument for establishing private prisons is that they can provide correctional services more efficiently and for a lower price than the government itself. This is because they do not have to compete directly with other state penitentiaries for contracts and are able to decide on the types of inmates that they will house. Similarly, those in favor argue that they provide a financial solution that prevents the government from having to invest major capital into building new prisons and providing other benefits such as pensions, salaries, and health-care.

Supporters of this industry argue that private prisons are more advantageous for American taxpayers, as for-profit owners have more incentives to find efficient practices and lower overall costs. Furthermore, private prison corporations claim that building new facilities generate income for surrounding communities as they create jobs and receive tax revenues.

Arguments Against Private Prisons

 However, the validity of these arguments are hard to confirm, as an evaluation of 24 independent studies on the cost-effectiveness of public vs. private prisons found that for-profit institutions were no more cost-effective than public ones. Instead, the report suggests that the most important factors in determining a prison’s daily cost per inmate are the facilities economy of scale, age, and security level. A 2011 report by the American Civil Liberties Union also found that in addition to influencing mass incarceration levels, private prisons are more expensive, more violent and less accountable than public ones.

Since private prisons are created to be more cost efficient than public ones, it is common for them to have lower staffing levels and training than their counterparts. This links to the argument that violence against guards tends to be higher, as a nationwide study found that assaults on guards were 49% more frequent in private prisons than in those run by the government.

The key arguments against the establishment of for-profit prisons are that they are not run with safety in mind, they harm minorities, they create financial incentives to incarcerate and they corrupt the political process. They argue that firms in the prison business reap profits by billing the government more than is needed and find alternative ways to lower costs which can make prisons less secure.

Secondly, it is argued that for-profit prisons marginalize minority groups, as according to a report by the Justice Policy Institute, private companies hold nearly half of the nation’s immigrant detainees. This is double the rate that it was nearly a decade ago.

Policy, Politics, and Problems

Moreover, political corruption and the influence of corporations on federal detention policies have become an area of major contention. Because private prisons are for-profit, many of them are funded and invested in by national corporations, investors, and politicians.

Of both public and private correction systems, Corrections Corporation of America (CCA) operates the 5^th largest in the US and has 51 owned-and-operated facilities in 16 states and 18 state-owned facilities in 7 states. Their large market share provides them with a staggering market cap of over $3 billion and reported revenues of $1.84 billion in 2015. Likewise, the 2^nd largest private corporation, GEO group, reported $1.79 last year.

So how much political influence do these corporations have?

According to a report by the Justice Policy Institute, private prisons increase their political influence through lobbying, direct campaign contributions, and building relationships and networks. This notion is supported by the fact that both corporations have funneled more than $10 million to political candidates since 1989 and have spent nearly $25 million on lobbying efforts.

Lobbying is a key reason why these for-profit correction corporations have been able to achieve such high margins, as their efforts have influenced government at all levels to underwrite private prison expenses and to pass laws that ensure certain levels of beds will be filled at each prison…also known as an incarceration quota? For example, in 2015 CCA and GEO lobbied for a Congressional mandate that required 34,0000 immigration detention beds be maintained and paid for with tax dollars.

Due to lobbying efforts, these corporations are also exempt from taxpayer oversights, as they have been excluded from the federal disclosure system under the Federal Freedom of Information Act, which denies public access to private prison operation records.

In an interview with the LA Times, Alonzo Peña, former director of US Immigration and Customs Enforcement from 2008 to 2010 said, “he had long been concerned that for-profit prison companies had been hiring former immigration official to help them secure favorable contract terms.” This is extremely problematic as manipulating the system through contracts allows the corporations to be exempt from following governmental standards and protocol.

So if the government is not responsible for keeping watch on these private prisons…who is?

The haziness between what is legally acceptable and followed by these private prisons continues to cause controversy in the US, as the government’s level of jurisdiction over these corporations becomes increasingly unclear.

What was created as a short-term solution to combating overpopulation has developed into a multi-billion-dollar industry where investors are pouring their money into these corporations’ stocks to watch the value go up on the stock exchange.
However, the tradeoff between public and private interest doesn’t seem to balance…

More inmates? More Money?

A life-sentence for a stock?

That sounds like democracy…right?

SOURCES:

The Prison Industry in the United States: Big Business or a New Form of Slavery?

http://www.economist.com/blogs/democracyinamerica/2010/08/private_prisons

http://greengarageblog.org/5-foremost-pros-and-cons-of-private-prisons

http://www.truth-out.org/news/item/21694-shocking-facts-about-americas-for-profit-prison-industry

https://www.propublica.org/article/by-the-numbers-the-u.s.s-growing-for-profit-detention-industry

https://www.washingtonpost.com/posteverything/wp/2015/04/28/how-for-profit-prisons-have-become-the-biggest-lobby-no-one-is-talking-about/?utm_term=.a8418a44291a

http://www.huffingtonpost.com/bernie-sanders/we-must-end-for-profit-pr_b_8180124.html

https://www.theguardian.com/commentisfree/2012/jul/06/prison-labor-pads-corporate-profits-taxpayers-expense

http://cad.sagepub.com/content/45/3/358

https://smartasset.com/insights/the-economics-of-the-american-prison-system

When Hanjin Shipping, the world’s seventh-largest container shipping line, filed for bankruptcy on August 31st, it put ports and retailers around the world into panic mode. By filing for bankruptcy, this meant that all Hanjin ships were either banned from docking in ports or were to seized by creditors.

The crisis caused major disruption to the global supply chain, as 89 ships carrying $14 billion in goods were left out at sea with no plans of being offloaded because to the company’s inability to pay docking fees. The effects of Hanjin’s bankruptcy on global trade were seen immediately, as the World Container Index reported that in the week following the ruling, rates on routes like Shanghai to Rotterdam were up by 39%. Furthermore, Hanjin accounts for 2.9% of the global market share and 10% on the Asia-to-Europe route.

For retailers and customers around the world, the question then became… how long will this last?

Hanjin’s collapse came at a pivotal time of the year, as retailers had already begun preparing for the holiday shopping season. Traditionally, goods begin shipping from Asia at this time in order to be on shelves for Thanksgiving, and with 89 ships stuck at sea this could cause major disruptions to the global supply chain.

So who’s stocking will be empty on December 25th?

According to analysts at CitiGroup, of the $14 billion worth of goods trapped on the ships, toys were expected to be the most affected good for retailers, along with apparel, handbags, washing machines and televisions. Additionally, Samsung claimed that it had $38 million of good stuck on two Hanjin ships in the U.S and would have to charter 16 planes to move the goods if the ships were unable to dock.

James Van Horn, a restructuring specialist at McGuireWoods LLP, estimated that, “the cost of shipping goods from Asia to the U.S. has almost doubled as a result of Hanjin’s bankrupcy.” This is because the inability of retailers to receive their products could drive up prices, as customers needing to shop for the holidays would now see them as “scarce” products. Furthermore, Van Horn predicts that the higher cost of stocking shelves could mean that stores across the US would hire fewer temporary workers and have a shortened Christmas shopping season.

The economic implications of Hanjin’s bankruptcy pose serious threats to retailers across the world, as they have already invested capital to produce the merchandise. Therefore, having goods sit on container ships can offset inventory planning and force retailers to suffer major losses due to their inability to sell their products. These effects can carry over onto the next season, as brands try to recuperate their sales.

In a statement about the bankruptcy, Jonathan Gold, VP of Supply Chain and Customs Policy for the National Retail Federation, said that “retailers’ main concern is that there is millions of dollars worth of merchandise that needs to be on store shelves that could be impacted by this.”

Only time will tell what happens for retailers this holiday season, but retailers and customers alike can only hope that whatever is on Santa’s list this year wasn’t stuck on a Hanjin ship.

http://www.bloomberg.com/news/articles/2016-09-09/quicktake-q-a-the-shipping-line-that-could-spoil-christmas

http://www.businessinsider.com/hanjin-bankruptcy-could-cause-christmas-disaster

http://www.usnews.com/news/business/articles/2016-09-01/hanjin-bankruptcy-causes-global-shipping-chaos-retail-fears

http://www.wsj.com/articles/hanjins-demise-why-global-shipping-glut-isnt-going-away-1472811129

http://www.marketwatch.com/story/hanjin-shippings-bankruptcy-filing-could-ruin-the-holiday-season-for-retailers-2016-09-02

http://www.reuters.com/article/us-hanjin-shipping-debt-usa-ports-idUSKCN11I03B

Behind the Vote

 Brexit. A coined term that filled Newsrooms, Facebook feeds, and local pubs all summer long.

Having joined the European Economic Community in 1973, the UK decision to revoke that membership on June 23^rd sent shockwaves around the world, as countries questioned what the implications would be for their own economic relations and the European community at large. With ‘Leave’ capturing the vote by only 52% to 48%, the decision was highly controversial and has continued to cause market anxiety in the months since.

The unknown implications of Brexit on the workforce was a key issue heading into the vote, as many economists argued that a decision to leave would trigger an economic reversal in the UK. This meant that if the UK were to ban EU migrants from working in the UK then it could potentially create more employment opportunities for nationals.

With EU workers accounting for 6.6% of the workforce, the referendum drove voters to ask serious questions about long term job security and availability. Would Brexit make it easier for young people to find jobs in the UK? Would wages increase as the result of a decreased supply of labor? What would happen to those jobs of migrants forced to leave? Where will the UK stand in terms of the international workplace?

Some economists predicted that in the short term, organizations would choose to either transition their operations overseas or put a hold on hiring new employees until there was more economic certainty. Both scenarios would decrease labor demand, which could have an impact on overall employment levels.

However, it was and continues to be extremely difficult for economists to predict the outcome of the decision, as UK was the first nation to leave the EU and therefore was no precedent to compare it to. Similarly, if the UK had decided to ‘remain’, its trade and economic relationships with other EU countries could have been severely damaged due a lack of trust and increased tension.

In speaking about this uncertainty, Jurga McCluskey, head of UK immigration at Deloitte said, “Nobody really understands the complexity of leaving the EU because no one has ever left the club… If we leave, the landscape for immigration will change significantly — it won’t be so much what we do but who we chose to work with. Who will those migrants be?”

Immigrants and Employment Skill Levels

According to research by Oxford University’s Migration Observatory, as of June 2016, there were 2.2 million EU workers in the UK composing for 6.6% of the total workforce. Of that number, 10% were employed in the manufacturing sector and 8% were in retail, hotels and restaurants. Due to the fact that the UK relies heavily on EU workers to fill low-skilled roles, the vote has insinuated anxiety for both employers and employees across various industries.

The Oxford research also found that prior to the vote, three-quarters of EU citizens working in the UK would not meet visa requirements for non-EU overseas workers. As shown in the chart below, low-level jobs were not the only ones at risk, with EU workers in the banking and finance sector showing projected ineligibility levels of 65-70%.

This is significant because once law makers clearly define what the immigration policy will be, it will affirm the governments “vision” for the post-Brexit economy.

But do UK nationals really want those jobs?

While many argue that that Brexit will supply a large number of low-level jobs for UK nationals, we must also consider whether or not people are actually going to be willing to take them?

In a conversation with Amy Smith, a student at the University of Sheffield, she expressed her concern saying:

‘Having grown up in Germany I witnessed the benefits of immigration first-hand. Immigration is important for the job market – especially since Germany’s demographic structure shows a larger aging population. Because of this, Germany doesn’t have enough young people to fill all of the positions which are becoming available as more and more of the last generation retire. Immigrants are vital for filling the low level positions German natives are less willing to take. I think the UK needs to recognize that the same implications can and will happen here.’

This issue was further discussed by economist Jonathan Porte who described the demand for immigrant’s jobs as not being just a zero-sum game. In an article published by the Guardian he explained, “it’s true that, if an immigrant takes a job, then a British worker can’t take that job – but it doesn’t mean he or she won’t find another one that may have been created, directly or indirectly, as a result of immigration.”

This ties back to the idea that if the demand for certain jobs never existed, will the Brexit decision really change that?

 Current State of the Workforce

 It has been three months since the June 23^rd vote, and economic numbers are showing more promise than expected. Although there was widespread fear that a decision to leave the EU would cause widespread job losses, economic data following Brexit is saying the opposite.

According to an August 2016 report by Telegraph, the post-Brexit economy saw a decrease in unemployment, an increase in consumer spending, and a government budget surplus. In July, the UK unemployment rate was at 4.9%, its lowest rate since 2005, and this number has remained unchanged according to August and September data.

So with these economic forces showing positive signs for the UK, does this mean that the workforce still has to worry?

Maybe not so fast.

While UK employment continues to rise, the country has seen a sharp rise in inflation which poses a major threat to job levels and wages. An August report showed that the UK’s CPI rose to 0.6% which was higher than expected, being up from 0.5% in June.

The Office of National Statistics spoke on this issue saying, “while there was no sign of the plunge in the value of the pound having an impact on CPI, the producer prices index (PPI) show that sterling’s slump had pushed up the cost of imports for British manufacturers, which could fuel inflation down the line.”

An increase in inflation could potentially affect the UK’s employment rate going forward, as the uncertainty of market can lead to lower investment and lower economic growth in the workforce. Furthermore, inflation can also trigger a lower export demand which could cause unemployment in various trading sectors.

 Due to the fact that the official removal of the United Kingdom from the European Union may not happen for some time, economic uncertainties will continue to dictate discussion among economics and politicians alike.

Until Parliament makes an official decision on Brexit’s terms, workers and immigrants across the UK must patiently wait… and hope that the decision to leave didn’t take their jobs with them.

 Sources: 

https://www.ft.com/content/953671ba-b784-37f6-8f29-45402e846d50

https://www.theguardian.com/business/2016/aug/17/uk-unemployment-claimant-count-falls-after-brexit

http://www.telegraph.co.uk/business/2016/08/19/what-brexit-apocalypse-no-sign-of-economic-woe-after-the-referen/

http://www.independent.co.uk/news/business/news/brexit-uk-economy-eu-referendum-result-jobs-employers-hiring-a7191381.html

https://www.ft.com/content/3d0de756-1764-11e6-b197-a4af20d5575e

http://www.independent.co.uk/news/uk/politics/points-based-immigration-system-theresa-may-explained-brexit-referendum-australia-a7227001.html

Although it’s been called the “most expensive city in the U.S.”, San Francisco homeowners are challenged with an issue more prevalent than just the neighborhoods steep price tag — homelessness.

According to a recent study by the California Budget Center, the city ranks first in California for economic inequality. With the average household income of the top 1% ($3.6 million) reaching 44 times that of the bottom 99% ($81,094), it’s clear that there is a serious housing and wealth disparity in the city.

While San Francisco is known for its free-thinking, diverse, and innovative culture, the city has long struggled with the issue of homelessness despite spending upwards of $240 million every year to tackle it. Moreover, it is estimated that the 1,600 chronically homeless people cost the approximately $80,000 each per year, with the number rising to $150,000 for the 338 considered “most needy” in the public health database.

The irony of the situation lies in the fact that while San Francisco is deemed as being a progressive, welcoming, and moderately warm city this also means that that there continues to be a large influx of homeless people to the city each year. Which, in turn, poses major challenges to both policy makers and residents who are already battling with the cities extremely expensive housing market.

In order to tackle the issue of homelessness in San Francisco and create serious change, policy makers need to look at the issue from both the homeowner and humanitarian perspective.

On the one hand, while it is understandable that homeowners are becoming increasingly frustrated with the issues, lawmakers cannot solely listen to residents complaining about having old mattresses lying outside their $4 million dollar walkup. Similarly, increasing budgets for welfare and rehabilitation programs will not be beneficial if there is not the infrastructure and culture to do so.

Maybe what the city really needs is a change of mindset — in both how people and policy makers view and understand the issue of homelessness?

It is not as simple as just ‘creating housing and offering programs’… it will take an entire community.

References:

http://projects.sfchronicle.com/sf-homeless/civic-disgrace/

http://qz.com/711854/the-inequality-happening-now-in-san-francisco-will-impact-america-for-generations-to-come/

http://www.sfchronicle.com/archive/item/A-decade-of-homelessness-Thousands-in-S-F-30431.php

http://www.triplepundit.com/2013/05/hult-gov-policy-homelessness-government-track/

As Coco Chanel once said, the number one rule for a lady is to “keep your heels, head, and standards high.”

…. but which ‘standard’ was she talking about?

Using fashion trends as economic indicators is not a new concept. In fact, economists have been using them in conjunction with the ‘retail sales index’ for many years. It began in the 1920s with George Taylor’s hemline theory, as he speculated that women wore shorter skirts as way to show confidence during strong economic periods. The trend then transitioned to lipsticks, when after 9/11 Estee Lauder suggested that the sharp increase in their sales was a direct response from women who were using impulse spending as a way to cope and grieve. More recently, however, economists have been using the “high heel index” as a way to measure consumers confidence in the economy.

While measuring the height of a heel may seem ridiculous, a recent recent study by IBM suggests that there is a strong correlation between the height of one’s shoe and the success of the economy. Their report comes as a result of an in-depth social media analysis, where researchers tracked trends and posts about shoes across the internet to understand what types of heels women were wearing and how high they were.

According to the report, heel heights have traditionally increased during harsh economic times, as fashion is used as a form of escapism and expression. However, more recent data indicates that this trend may be “last season”. In 2009, shoe manufacturers and retailers were reporting that they were selling more lower height heels and flats in their store. Since this was still during the recession, IBM analysts theorized that there must be a shift taking place with consumers. By wearing lower heels, were women saying that no longer felt the need to be showy or ostentatious? Or were they just trying to be more comfortable on their walk to work?

Although there is no perfect answer or way to measure the index, it is clear that economists can gain tremendous insight about our economy and consumer confidence by looking at even the most commonplace things.