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South Carolina Law Review, Vol 72, 2021

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SOUTH CAROLINA
LAW REVIEW
VOLUME 72

2020–2021

NUMBERS 1–4

BOARD OF EDITORS
MORGAN E. SPIRES
Editor-in-Chief
RYAN T. ROMANO
Managing Editor

JORDAN T. DEJACO
ROBERT D. HOLLAND III
ANDREA L. MCDONALD
ANNA C. PARHAM
JESSICA B. THOMPSON
Associate Editors-in-Chief

CAROLINE K. AVANT
TIM N. LORICK
EMERY T. SLOAN
Executive Articles Editors

JALEN D. BROOKS-KNEPFLE
HUGH M. GALLAGHER IV
THOMAS B. IANDOLI
GRAYDON V. OLIVE IV
KRISTEN A. SOUCY
Articles Editors

ZACHARY B. RANDOLPH
Executive Student Works Editor

JOHN P. BOZEMAN
Senior Articles Editor

GRACE G. BROWN
Associate Managing Editor

KELLY L. TAYLOR
Senior Student Works Editor

MICHAEL P. MORAN
Senior Research Editor

HUNTER R. POPE
Fourth Circuit Editor

MADISON C. GUYTON
ROBERT M. HURST
Student Works Editors

NASH W. PARHAM
MILES J. REYNOLDS
CHRISTOPHER R. WRAY
Research Editors

SUHA S. NAJJAR
ZACHARY A. TURNER
Symposium Editors

EDITORIAL STAFF
NIKESH D. AMIN
WILLIAM G. ARNOLD
DIANA M. AUGUST
DOLE P. BAKER III
BRIANA CACACE
SYDNEY J. DOUGLAS
AMELIA M. FARMER
ELIZABETH T. FRENCH

ALEXANDRA C. GLUNT
ASHLEIGH B. HARRIS
RYAN P. HENRY
WILLIAM E. HILGER
ROBERT H. LEVIN
MARK P. LEWALLEN II
STEPHEN J. LEWIS
DIXIE N. MCCOLLUM
RYAN A. MOSSER
PAUL N. NYBO

ADAM P. REICHEL
DANIELLE A. ROBERTSON
ROGER M. STEVENS
ANNA C. TUCKER
HANNAH L. WARD
JORDAN M. WAYBURN
SAMUEL C. WILLIAMS
MONTANA N. YORK

DEREK W. BLACK
ELIZABETH CHAMBLISS
LISA A. EICHHORN
PHILIP T. LACY
MARTIN C. MCWILLIAMS JR.
Faculty Advisors

Electronic copy available at: https://ssrn.com/abstract=3890852

INMATES MAY WORK, BUT DON’T TELL SOCIAL SECURITY
Stephanie Hunter McMahon
I.

INTRODUCTION..................................................................................... 757

II. PRISON LABOR ..................................................................................... 760
III. MECHANICS OF THE PAYROLL TAX SYSTEM........................................ 765
A. Taxes Under FICA ........................................................................ 765
1. In General .............................................................................. 765
2. Prison Specifics ...................................................................... 767
B. Benefits of FICA............................................................................ 768
1. In General .............................................................................. 768
2. Prison Specifics ...................................................................... 773
IV. PROPOSAL ............................................................................................ 777
V. CONCLUSION ........................................................................................ 781

I.

INTRODUCTION

Much of the public is aware that the United States has the highest
incarceration rate in the world, and as a result of films like 13th, When They
See Us, and Just Mercy, many recognize the inequities of mass incarceration.1
Therefore, it may be unsurprising that “[c]ontact with the criminal justice
system” comes with many negative long-term consequences, including
restrictions on employment, housing, and voting, as well as negative impacts
on physical and mental health.2 It should also be unsurprising that these
negative consequences affect some communities more than others.3

1.
Inst. for Crime & Just. Pol’y Rsch. & Birbeck Univ. of London, Highest to Lowest Prison Population Rate, WORLD PRISON BRIEF, https://www.prisonstudies.org/highest-tolowest/prison-population-total?field_region_taxonomy_tid=All [https://perma.cc/FU63-82D
K].
2. Sarah K.S. Shannon et al., The Growth, Scope, and Spatial Distribution of People
with Felony Records in the United States, 1948–2010, 54 DEMOGRAPHY 1795, 1796 (2017).
3. See generally Wendy Sawyer, Visualizing the Racial Disparities in Mass
Incarceration, PRISON POL’Y INITIATIVE (July 27, 2020), https://www.prisonpolicy.org/blog/20
20/07/27/disparities/ [https://perma.cc/G3JE-4W2H] (analyzing racial disparities in the criminal
justice system).

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One specific issue that has gained attention is the employment status of
inmates engaged in prison labor.4 The Thirteenth Amendment made
involuntary servitude unconstitutional “except as a punishment for crime
whereof the party shall have been duly convicted,” and a long history of prison
labor has resulted.5 The desire to encourage inmate labor is, if anything,
increasing. The First Step Act, signed into law on December 21, 2018,
requires that the Attorney General submit a report to Congress assessing the
Bureau of Prisons’ efforts to enable 75% of the eligible minimum and lowrisk offenders to participate in a prison work program for not less than twenty
hours per week.6 The goal is to require all able inmates to participate in some
form of work assignment.7 How that goal is interpreted depends on whether
the prison is federal or state, whether the prison is public or private, and
whether the institution has a relationship with local private employers.8
Despite a prevailing requirement that inmates work and despite them
being forced to work under threat of punishment, inmates are not “employees”
or “workers” in the commonly understood sense.9 Through judicial
interpretation of the law, inmates are denied the protections afforded for
workers under the Fair Labor Standards Act.10 Consequently, because their
4.

Darius Rafieyan & Cardiff Garcia, The Uncounted Workforce, NPR: THE INDICATOR
PLANET MONEY (June 29, 2020), https://www.npr.org/transcripts/884989263
[https://perma.cc/N3VJ-VUDA]; Whitney Benns, American Slavery, Reinvented, THE
ATLANTIC (Sept. 21, 2015), https://www.theatlantic.com/business/archive/2015/09/prisonlabor-in-america/406177/ [https://perma.cc/5829-NGRV]; Daniel Mortiz-Rabson, “Prison
Slavery”: Inmates Are Paid Cents While Manufacturing Products Sold to Government,
NEWSWEEK (Aug. 28, 2018), https://www.newsweek.com/prison-slavery-who-benefits-cheapinmate-labor-1093729 [https://perma.cc/3RG5-JTM8]; Angela Hanks, How to End Prison
Labor Exploitation and Invest in Incarcerated People, FORBES (Aug. 23, 2018, 10:00 AM),
https://www.forbes.com/sites/angelahanks/2018/08/23/from-exploitation-to-investment-howto-end-low-wage-prison-labor/ [https://perma.cc/9V93-M8RC]; Chandra Bozelko, Give
Working Prisoners Dignity–and Decent Wages, NAT’L REV. (Jan. 11, 2017),
https://www.nationalreview.com/2017/01/prison-labor-laws-wages/ [https://perma.cc/6TCAC66B]; Lindsay Putnam, The Seven Weirdest Jobs That Prisoners Do, N.Y. POST (June 23,
2015), http://nypost.com/2015/06/23/the-seven-weirdest-jobs-that-prisoners-do/ [https://perma.
cc/GM8N-THC2].
5. U.S. CONST. amend. XIII, § 1.
6. First Step Act of 2018, Pub. L. No. 115-391, 132 Stat. 5194, 5205–06.
7. 28 C.F.R. § 545.20(a)(2) (2021).
8. See German Lopez, The First Step Act, Explained, VOX (Feb. 5, 2019, 9:42 PM),
https://www.vox.com/future-perfect/2018/12/18/18140973/state-of-the-union-trump-first-stepact-criminal-justice-reform [https://perma.cc/Y358-MHFQ]; Liliana Segura, The First Step Act
Could Be a Big Gift to CoreCivic and the Private Prison Industry, THE INTERCEPT (Dec. 22,
2018, 9:20 AM), https://theintercept.com/2018/12/22/first-step-act-corecivic-private-prisons/
[https://perma.cc/EL94-6GFD].
9. Benns, supra note 4; Mortiz-Rabson, supra note 4.
10. Renee Elaine Henson, Picking Cotton for Pennies: An Exploration into the Law’s
Modern Endorsement of a Free-Prison Workforce, 2 BUS. ENTREPRENEURSHIP & TAX L. REV.
193, 200–01 (2018).
FROM

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wages generally need not be set at a market price, inmates are often
uncompensated or poorly compensated—some only two cents per hour.11
These low wages are often garnished by the government. Prisoners have gone
on strike as a result of their low or non-existent pay, but some advocates urge
them, instead, to strike over their classification as non-workers.12
From a tax perspective, prison labor raises critical issues for payroll taxes
and the benefits funded by those taxes. As discussed more fully in Part II,
there are three categories of work prisoners undertake, only one of which
requires the payment of Social Security and Medicare taxes and,
consequently, may contribute toward inmates’ ability to receive future
benefits.13 In the U.S. system, the Federal Insurance Contributions Act (FICA)
is the largest payroll tax, and it raises almost 35% of the federal government’s
revenue.14 FICA finances much of the American social safety net in the form
of Social Security, disability, and Medicare.15 Although the Bureau of Prisons
is required to help federal prisoners apply for federal and state benefits upon
release, time spent working in the prison system generally does not contribute
toward earning those benefits.16 This is only one of over 38,000 provisions
imposing collateral consequences as a result of conviction.17
The consequences of incarceration generally, and with respect to benefits
specifically, have a disparate impact on various segments of society. As of
2020, the American criminal justice system incarcerates almost 2.3 million
people, and despite African-Americans comprising only 13% of U.S.
residents, they are 40% of those incarcerated.18 Although incarceration rates
have fallen since 2008, 1.5% of Black adults were imprisoned (as opposed to
serving time) in 2018 as compared to 0.8% of Hispanics and 0.3% of whites.19
With 4.88% of the adult male African-American population in jail and 10.26%
11. Benns, supra note 4.
12. Bozelko, supra note 4.
13. See infra Part II.
14. Federal Insurance Contributions Act, I.R.C. §§ 3101–3128; Federal Unemployment
Tax Act, §§ 3301–3311; see § 1401 (a)–(b); § 3101(a)–(b); § 3111(a)–(b); OFF. OF MGMT. &
BUDGET, HISTORICAL TABLES 32 tbl.2.1 (2021), https://www.ssa.gov/benefits/retirement/plann
er/credits.html [https://perma.cc/9YDE-9FS9].
15. Although Social Security is expected to be fully funded by targeted tax revenues,
Medicare has four parts and FICA only partially funds Part A. JULIETTE CUBANSKI ET AL., THE
FACTS ON MEDICARE SPENDING AND FINANCING 6 (2019).
16. 18 U.S.C. § 4042(a)(6)(A); 20 C.F.R. §§ 404.468(a), 416.1325(a) (2021).
17. Michael Carlin & Ellen Frick, Criminal Records, Collateral Consequences, and
Employment: The FCRA and Title VII in Discrimination Against Persons with Criminal
Records, 12 SEATTLE J. FOR SOC. JUST. 109, 112 (2013).
18. Wendy Sawyer & Peter Wagner, Mass Incarceration: The Whole Pie 2020, PRISON
POL’Y INITIATIVE (Mar. 24, 2020), https://www.prisonpolicy.org/reports/pie2020.html
[https://perma.cc/8FPF-AWPB].
19. E. ANN CARSON, U.S. DEP’T OF JUST., PRISONERS IN 2018, at 10 tbl.6 (2020),
https://www.bjs.gov/content/pub/pdf/p18.pdf [https://perma.cc/2WHG-PZAK].

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having been in prison or on parole,20 the impact of limitations on the ability
to earn toward Social Security and Medicare is tremendous for former
inmates, their dependents, and their communities more broadly.
This Article examines the ways in which inmates are carved out of the
protections offered by the Social Security and Medicare systems. By statute,
inmates are unable to receive Social Security or disability benefits while
incarcerated.21 Additionally, in many circumstances, their labor does not
constitute employment for purposes of calculating quarters of employment for
benefits.22 Therefore, inmates may work their entire prison sentence and, yet,
on release discover that they no longer have sufficient years left in their
working lives to earn the benefits of Social Security for themselves or their
dependents.23 As the United States grapples with its mass incarceration
problem, remedying the narrow issue of Social Security and Medicare
entitlement for individuals who are clearly working, and often without the
choice of whether to do so, is one way to ease the damage of incarceration on
many communities.
II. PRISON LABOR
In 2020, more than 2.3 million inmates resided in American jails and
prisons.24 These jails and prisons, in addition to parole and probation, cost the
federal and state governments an estimated $80.7 billion per year.25 Concern
for this cost drives some policies regarding prison labor but so does a desire
to increase job training, reduce recidivism, and decrease violence in prisons,
all of which appear to be aided by prison employment.26 What is not always
examined is the impact that employment has on inmates themselves. This Part
focuses on the financial aspect of that impact.
Built on the Black Codes and cheap—often African-American—labor to
pay the costs of incarceration, the modern prison system developed dependent
on inmate labor; however, the type of labor was restricted.27 In 1935, prison
20. Shannon et al., supra note 2, at 1805 tbl.1.
21. 42 U.S.C. § 306(a); see also 20 C.F.R. § 404.468(a) (2021).
22. See infra Section III.B.
23. See infra Section III.B.2.
24. Sawyer & Wagner, supra note 18.
25. Peter Wagner & Bernadette Rabuy, Following the Money of Mass Incarceration,
PRISON POL’Y INITIATIVE (Jan. 25, 2017), https://www.prisonpolicy.org/reports/money.html
[https://perma.cc/343M-LPVB].
26. FED. BUREAU OF PRISONS, U.S. DEP’T OF JUST., INMATE WORK AND PERFORMANCE
PAY 1 (2008) [hereinafter PROGRAM STATEMENT NO. 5251.06]. Studies show the Prison
Industry Enhancement Certification Program (PIECP) accomplishes many of its objectives. See,
e.g., CINDY J. SMITH ET AL., CORRECTIONAL INDUSTRIES PREPARING INMATES FOR RE-ENTRY:
RECIDIVISM & POST-RELEASE EMPLOYMENT 8–9 (2006).
27. Henson, supra note 10, at 196–98.

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employment was limited when the Ashurst-Sumners Act made it illegal to
knowingly transport convict-made goods through interstate or foreign
commerce with notable exceptions for agricultural goods and service
operations, such as refurbishing goods.28 The Ashurst-Sumners Act was
primarily motivated by the fear that prison labor would unfairly compete with
free labor because, as a captive pool of labor, prisoners were paid little.29
Due to concerns over competition, the proper level of wages for inmate
workers has long been controversial.30 Worried about displacement and unfair
competition, organized labor tends to support the highest “prevailing” wage
for inmate laborers, and possibly desiring a competitive advantage,
corrections administrators tend to support sub-minimum wages.31 One
compromise to appease both groups (but not the inmates themselves) is to
require payment of the federal minimum wage and then permit the
garnishment of those wages to pay for the costs of incarceration, including
room and board as well as other expenses—such as fees and restitution.
Prison labor can be provided either to the prison and prison community
or to external consumers in the form of goods or services.32 Labor for
consumption within the prison is commonly referred to as a prison work
assignment.33 According to one estimate, 53% of over one million eligible
inmates have a work assignment—although all federal inmates are required to
have one unless they are medically disabled.34 The other type of prison labor
is for external consumption: to produce goods and services that are consumed
outside of the prison.35 Within the latter category, employers may be either
the government or private businesses.36 In 2003, 7% of federal and state
inmates—about 23% of those eligible in federal prisons and about 6% in state
prisons—worked in prison industry programs.37 This variety of work
arrangements gives rise to much of the complexity within the tax treatment of
prison labor.

28. 18 U.S.C. § 1761(a)–(b).
29. E.g., Wentworth v. Solem, 548 F.2d 773, 775 (8th Cir. 1977) (“Sections 1761-62
embody Congressional interest in free labor and were designed to protect private business from
competition from goods produced with inexpensive convict labor.”).
30. ROB ATKINSON & KNUT A. ROSTAD, CAN INMATES BECOME AN INTEGRAL PART OF
THE U.S. WORKFORCE?, at 23 (2003).
31. Id.
32. Noah D. Zatz, Working at the Boundaries of Markets: Prison Labor and the Economic
Dimension of Employment Relationships, 61 VAND. L. REV. 857, 869–70 (2008).
33. FED. BUREAU OF PRISONS, U.S. DEP’T OF JUST., FEDERAL PRISON SYSTEM: FY 2021
PERFORMANCE BUDGET CONGRESSIONAL SUBMISSION 8 (2020).
34. ATKINSON & ROSTAD, supra note 30, at 4.
35. Zatz, supra note 32, at 869–70.
36. Id. at 869.
37. ATKINSON & ROSTAD, supra note 30, at 4.

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For prisoners receiving work assignments, their pay is generally low,
although the amount depends on whether the inmate is at a federal or state
facility.38 States are free to establish their own pay scale with little or no
payment.39 For example, in eight states (Alabama, Arkansas, Florida, Georgia,
Mississippi, Oklahoma, South Carolina, and Texas), prisoners are not paid for
their work assignments.40 The typical inmate earns, on average, between
$0.14 and $0.63 for work assignments.41
Inmates can produce goods or services for external consumption through
two types of work arrangements, though both limit inmate labor’s competition
with non-inmate labor.42 In the first instance, the Federal Bureau of Prisons
operates the Federal Prison Industries (FPI) program, and many states have
equivalents.43 At the federal level, Congress limits FPI’s competition by
prohibiting sales outside of the government.44 In the second instance,
Congress enacted the Prison Industry Enhancement Certification Program
(PIECP), permitting private employers to hire inmate labor at the prevailing
local wage of non-inmate labor.45 Both programs are thus limited for noninmate considerations.
FPI is a wholly-owned federal corporation that employs federal prisoners
to make goods for sale to the federal government.46 As of 2019, FPI marketed
numerous products and services in seven business lines—agribusiness,
clothing and textiles, electronics, fleet, office furniture, recycling, and
services—under the tradename of UNICOR, with sixty factories and two
farms located at fifty-two prison facilities.47 That year, 17,505 inmates worked
38. See State and Federal Prison Wage Policies and Sourcing Information, PRISON
POL’Y INITIATIVE (Apr. 10, 2017), https://www.prisonpolicy.org/reports/wage_policies.html
[https://perma.cc/F4CZ-ECN6].
39. See, e.g., Murray v. Miss. Dep’t of Corr., 911 F.2d 1167, 1168 (5th Cir. 1990) (noting
that “compensating prisoners for work is not a constitutional requirement but, rather, is by the
grace of the state” (quoting Mikeska v. Collins, 900 F.2d 833, 837 (5th Cir. 1990))).
40. Mortiz-Rabson, supra note 4.
41. Wendy Sawyer, How Much Do Incarcerated People Earn in Each State?, PRISON
POL’Y INITIATIVE (Apr. 10, 2017), https://www.prisonpolicy.org/blog/2017/04/10/wages/
[https://perma.cc/3HFG-9WXG].
42. JULIE GOODRIDGE ET AL., NORTHSTAR ASSET MGMT., PRISON LABOR IN THE
UNITED STATES: AN INVESTOR PERSPECTIVE 18–19 (2018) (listing PIECP and non-PIECP
opportunities).
43. Id.
44. 18 U.S.C. § 1761(a).
45. GOODRIDGE ET AL., supra note 42, at 18. Additionally, written assurances must
document that non-inmate workers will not be displaced or severely impacted, and organized
labor and local private industry must be consulted before start-up. ATKINSON & ROSTAD, supra
note 30, at 3.
46. GOODRIDGE ET AL., supra note 42, at 19.
47. FED. PRISON INDUS., INC., FISCAL YEAR 2019 ANNUAL MANAGEMENT REPORT 3
(2019).

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in an FPI program.48 FPI’s goal is to employ inmates within three years of
release, and in 2020, FPI’s goal was to employ 19,255 employees.49 Because
FPI is intended to employ as many workers as possible, it does not always
make a profit. For example, in 2001, although FPI employed 22,500 prisoners
and had sales of more than $583 million, it made a profit of only $4 million
and in 2000, it actually lost $12.8 million.50
Although the statute governing FPI does not state specific wage
requirements, FPI workers are paid according to pay grades established by the
FPI board.51 Pay grades are set “[i]n recognition of budgetary constraints and
for the effective management of the overall performance pay program” such
that each grade includes a certain percentage of inmates.52 The top grade, for
example, can only have 5% of the institution’s assignments.53 Current rates
range from $0.23 to $1.15 per hour, with a premium pay rate of an additional
$0.20 per hour; inmates may qualify for overtime at double pay and earn
toward a five-day paid vacation (although when the vacation can be claimed
is limited).54
In addition to the FPI program, Congress has permitted some inmates to
work for private businesses after liberalizations to the Ashurst-Sumners Act
in 1979.55 Through the PIECP, approximately 5,000 inmates work for private
businesses that contract with the state, and they earn “wages at a rate which is
not less than that paid for work of a similar nature in the locality in which the
work was performed”—often called the “prevailing local wage” of noninmate labor.56 On average, workers earned $1,816.63 for the quarter ending
June 30, 2020, but some wages were especially low: for example, Georgia
averaged $217, Mississippi $246, and Montana $417 per person.57 According
48. Id. at 9.
49. Id.
50. ATKINSON & ROSTAD, supra note 30, at 16.
51. FED. BUREAU OF PRISONS, U.S. DEP’T OF JUST., WORK PROGRAMS FOR INMATES –
FPI 1 (2017) [hereinafter PROGRAM STATEMENT NO. 8120.03]. For more on UNICOR, see
generally UNICOR, FACTORIES WITH FENCES: 85 YEARS BUILDING BRIGHTER FUTURES
(2019), https://www.unicor.gov/publications/corporate/FactoriesWithFences_FY19.pdf [https:
//perma.cc/UL3-VXVT].
52. PROGRAM STATEMENT NO. 5251.06, supra note 26, at 8.
53. Id.
54. PROGRAM STATEMENT NO. 8120.03, supra note 51, at 25–29; PROGRAM STATEMENT
NO. 5251.06, supra note 26, at 11.
55. Justice System Improvement Act of 1979, Pub. L. No. 96-157, § 827, 93 Stat. 1167,
1215 (codified at 18 U.S.C. § 1761(c)).
56. 18 U.S.C. § 1761(c); BUREAU OF JUST. ASSISTANCE, U.S. DEP’T OF JUST., PRISON
INDUSTRY ENHANCEMENT CERTIFICATION PROGRAM 1 (2004); GOODRIDGE ET AL., supra note
42, at 18.
57. See NAT’L CORR. INDUS. ASS’N, PRISON INDUSTRY ENHANCEMENT CERTIFICATION
PROGRAM CERTIFICATION & COST ACCOUNTING CENTER LISTING: STATISTICS FOR THE

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to one study, between 1998 and 2001—when a worker had to earn $830 per
quarter, or $3,320 per year, to earn a quarter year of credit toward Social
Security—PIECP inmates had an annual gross income of $785 in the twentyfifth percentile; $2,345 at the median; $3,755 at the mean; and $16,187 at the
maximum.58 Therefore, only about one-half of PIECP employees earned
toward Social Security in 2001.59
In both FPI and PIECP employment, inmates do not receive every dollar
of their wages. Under FPI, Congress requires withholding at least 15% for
costs associated with the inmate’s release from prison; the statute does not
provide an upper cap on garnishment.60 Under PIECP, Congress limits
garnishment to a maximum of 80% of gross wages.61 Therefore, if an inmate
works on a PIECP project paying the federal minimum wage of $7.25 per
hour, the inmate may only currently net $1.45 per hour—some additional
amount is held in an interest bearing account for the inmate’s release.62
Between 1979 and 2003, jurisdictions operating a PIECP program paid over
$264 million in wages but deducted over $146 million from those payments—
in part for room and board, taxes, child support, and victim compensation
funds.63 Thus, parties other than inmates are the first beneficiaries of these
incomes: 30% is paid to the prison for room and board, 11% to Social Security
and Medicare, and 9% to crime victims.64
State treatment of inmate labor largely mirrors the federal system. With
respect to internal work assignments, most states pay some small amount per
hour of work.65 Additionally, many operate state-owned businesses or
participate in PIECP.66 For example, Missouri requires inmates to work unless
they present proof of inability, and inmates make a host of products—from
practical to patriotic.67 Similarly, in 1994, over 70% of Oregon voters
QUARTER ENDING JUNE 30, 2020, at 1 (2020); NAT’L CORR. INDUS. ASS’N, PRISON INDUSTRY
ENHANCEMENT CERTIFICATION PROGRAM QUARTERLY REPORT: STATISTICS FOR THE
QUARTER ENDING JUNE 30, 2020, at 1 (2020). To calculate the gross wages, the total should be
reduced by amounts given for FPI ($755,491), leaving $9,239,362.
58. PETERSIK ET AL., IDENTIFYING BENEFICIARIES OF PIE INMATE INCOMES: WHO
BENEFITS FROM WAGE EARNINGS OF INMATES WORKING IN THE PRISON INDUSTRY
ENHANCEMENT (PIE) PROGRAM?, at 49 tbl.20 (2003); Quarter of Coverage, SOC. SEC. ADMIN.,
https://www.ssa.gov/oact/cola/QC.html [https://perma.cc/9VL9-BNB6].
59. See PETERSIK ET AL., supra note 58, at 49 tbl.20.
60. 18 U.S.C. § 4126(c)(4).
61. § 1761(c)(2).
62. GOODRIDGE ET AL., supra note 42, at 19.
63. BUREAU OF JUST. ASSISTANCE, supra note 56, at 4.
64. PETERSIK ET AL., supra note 58, at 17, 53.
65. See State and Federal Prison Wage Policies and Sourcing Information, supra note
38.
66. See Sawyer, supra note 41.
67. MO. ANN. STAT. § 217.337 (West 2020); see also Oldcroft v. Mo. Bd. of Prob. &

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approved a ballot measure mandating all prisoners work forty hours per week
and requiring the state to actively market inmate labor to private employers.68
Further, although Massachusetts prohibits private companies from employing
inmates, it has a long history with its own prison industries program,
MassCor.69 Thus, states have a range of work arrangements for inmates much
like the federal government.
III. MECHANICS OF THE PAYROLL TAX SYSTEM
American payroll taxes are earmarked for particular expenditures, notably
for Social Security and Medicare.70 The link between the tax and its related
benefits was once thought to be an important political choice to ensure the
continuation of the benefit programs.71 Nevertheless, this link is not
necessary, and with respect to prison labor, it does not always exist and is
sometimes selectively retained.72
A. Taxes Under FICA
1. In General
FICA imposes limited taxes that have greater financial impact on lowincome taxpayers.73 For 2021, the portion of FICA that funds Social Security
is a 12.4% tax on the first $142,800 of an employee’s wages (this cap is
indexed annually for inflation).74 This means that, in 2021, the maximum
Social Security tax an employee can pay is $8,853.60, and any wages earned
in excess of $142,800 are not subject to the Social Security tax. The portion
of FICA that funds Medicare is a 2.9% tax not subject to a wage cap and can,
Parole, No. 4:12-CV-66, 2012 WL 1205119, at *3–4 (E.D. Mo. Apr. 11, 2012); Missouri
Bicentennial Limited Edition Commemorative Items, MO. VOCATIONAL ENTERS.: CORR.
INDUS., https://docservices.mo.gov/mve/index.html [https://perma.cc/VA63-LY76] (providing
examples of the variety of products made by Missouri inmates).
68. Oregon State Prison Inmates Required to Work Full Time, Measure 17 (1994),
BALLOTPEDIA, https://ballotpedia.org/Oregon_State_Prison_Inmates_Required_to_Work_Full
_Time,_Measure_17_(1994) [https://perma.cc/C4B8-5Y2M]. In 1999, Oregon’s Measure 68
created a semi-independent state agency called Oregon Corrections Enterprises, which provides
inmates with training and work opportunities. About Us, OR. CORR. ENTERS.,
https://oce.oregon.gov/content/OCE_About_Us.asp [https://perma.cc/VTH7-B4RH].
69. See MASS. GEN. LAWS ANN. ch. 127 § 51 (West 2020).
70. I.R.C. § 3101(a).
71. STEPHANIE HUNTER MCMAHON, PRINCIPLES OF TAX POLICY 1 (2d ed. 2018).
72. Id. at 267.
73. Id. at 260.
74. Janet Berry-Johnson, FICA Tax: Everything You Need to Know, BENCH (May 12,
2020), https://bench.co/blog/tax-tips/fica-tax/ [https://perma.cc/8GAP-YFNK].

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therefore, be a significantly larger tax for high-wage taxpayers.75 One half of
FICA is imposed on employers, and the other half is imposed on employees.76
Because the Social Security portion of FICA is limited by the wage cap, the
tax is regressive and constitutes a larger percentage of wages for low-wage
employees.77
Additionally, FICA does not apply to all workers.78 Employment that is
taxed for Social Security and Medicare is “covered” employment, whereas
employment that is exempt is “noncovered” employment.79 For example,
some state, county, and municipal employees may be entitled to state-funded
retirement benefits and not required to pay FICA, in which case their work is
noncovered.80 Other examples of noncovered employment include certain oncampus college jobs, certain religious work, and all inmate labor.81
For covered employment, FICA generally applies to the first dollar
earned.82 In limited circumstances, Congress has set a minimum threshold so
that payroll taxes do not apply.83 For example, Social Security and Medicare
only apply to employers who pay more than $2,300 to a household worker
and more than $1,800 to an election worker; more special limits apply for the
tax’s application to farm workers.84 Once above the threshold, I.R.C.
§ 6051(a) requires employers report compensation subject to FICA.85
Currently, both the employer’s and employee’s taxes operate through
withholding wages or based on those wages.86 To the extent an employee has
multiple employers, the employee receives a refundable credit for his or her
portion paid on wages in excess of the cap; however, each employer must
always pay its full portion, which can result in employers collectively paying
more than the $8,537.40 maximum per employee.87 Employers must deposit
75. Id. Additionally, a 0.9% tax is imposed on those with income above $250,000 for
joint returns or $200,000 for individual filers. § 1401(b)(2).
76. Berry-Johnson, supra note 74. Compare § 3101(a)–(b) (providing for individual
income tax), with § 3111 (a)–(b) (providing for employer payroll tax).
77. See Berry-Johnson, supra note 74.
78. See § 3121 (clarifying taxable wages and employment exceptions).
79. See §§ 3101(a)–(b)(1), 3121(b).
80. Social Security Protection Act of 2004, Pub. L. No. 108-203, § 419, 118 Stat. 493.
81. I.R.C. § 3121(b)(2), (b)(7)(C)(i), (b)(8).
82. See Berry-Johnson, supra note 74.
83. See, e.g., § 3121(b)(7).
84. Topic No. 756 Employment Taxes for Household Employees, INTERNAL REVENUE
SERV. (Jan. 6, 2021), https://www.irs.gov/taxtopics/tc756 [https://perma.cc/CPH9-BME7];
Election Workers: Reporting and Withholding, INTERNAL REVENUE SERV. (Dec. 3, 2020),
https://www.irs.gov/government-entities/federal-state-local-governments/election-workersreporting-and-withholding [https://perma.cc/8RXL-89F6]; INTERNAL REVENUE SERV., DEP’T
OF THE TREASURY, (CIRCULAR A), AGRICULTURAL EMPLOYER’S TAX GUIDE 11–12 (2019).
85. § 6051(a).
86. Berry-Johnson, supra note 74.
87. § 6413(c)(1).

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withheld and owed taxes according to one of two deposit schedules: monthly
or semi-weekly.88 A 15% penalty may be imposed on employers if deposits
are not timely.89 If employers do not properly withhold wages, employees still
owe their share of FICA.90
2. Prison Specifics
In most cases, inmate labor does not constitute covered employment.91
Therefore, any earnings inmates receive are generally not subject to FICA.92
Congress included the current exclusion in 1950.93 Today, employment is
defined for FICA purposes to exclude services performed “in a hospital,
home, or other institution by a patient or inmate thereof.”94 Congress also
exempts such work from the additional 0.9% Medicare tax.95 The only
exception is when inmates work for PIECP, in which case their labor is
generally, but not always, subject to the tax.96 One result of the exclusion is
that employers enjoy a reduced cost of labor.97
Work in prison—either through a prison assignment, FPI, or (in some
cases) PIECP—does not constitute covered employment for purposes of
FICA.98 PIECP is difficult because its governing rules are ambiguous.99 The
Social Security Administration describes FICA’s applicability to prison labor
as dependent on a common law test for employment status.100 “This includes
the ability of the employer to select, dismiss, and control the worker
88. See Form 941 for 2021: Employer’s QUARTERLY Federal Tax Return, INTERNAL
REVENUE
SERV.
(rev.
Mar.
2021),
https://www.irs.gov/pub/irs-pdf/f941.pdf
[https://perma.cc/5B86-E2XX]; INTERNAL REVENUE SERV., DEP’T OF THE TREASURY,
(CIRCULAR E), EMPLOYER’S TAX GUIDE 26 (2019).
89. § 6656(b)(B)(ii).
90. 26 C.F.R. § 31.3102-1(c) (2021). Moreover, employers are liable for 20% of that
employee’s share of FICA (40% if the employer failed to file information return without
reasonable cause), plus the employer’s portion of FICA. I.R.C. § 3509(b)(1); Rev. Rul. 86-111,
1986-2 C.B. 176.
91. I.R.C. § 3121(b)(6)(A).
92. See id.
93. Social Security Amendments Act, P.L. 81-734, 64 Stat. 477, § 210.
94. I.R.C. § 3121(b)(7)(F)(ii). Therefore, shifting from incarceration to supervision of
convicted persons may not change the tax result. See id.
95. § 3121(u)(3), (u)(2)(B)(ii)(II).
96. § 3121(b)(7)(C)(i).
97. See § 3111 (prescribing that, as taxable wages decrease due to exemptions, the total
amount required by employers will also decrease because they are taxed at a percentage of the
taxable wages paid).
98. See § 3121(b)(6)(a).
99. See id.
100. Program Operations Manual System, SOC. SEC. ADMIN., https://secure.ssa.gov/apps
10/poms.nsf/lnx/0301901560 [https://perma.cc/U88V RT2B]; 20 C.F.R. § 404.1007(a) (2021).

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inmate.”101 Thus, the issue for private employers within PIECP is whether the
relationship qualifies under the common law definition of employment for
Social Security and Medicare. Despite this legal ambiguity, many inmates
working in PIECP programs contributed up to $1.75 million (or 6%) of their
wages in 2003, and employers contributed 5.4% that same year.102
When inmates are excluded from FICA, their employers enjoy real world
advantages. Prisons can operate at lower costs because of inmate labor.103
Prison industries can enjoy the value and existence of a regular, low-price
workforce without funding their share of inmates’ eventual use of the
American social safety net.104
However, if inmates and their employers were to pay FICA taxes (as
occurs with some PIECP employment), the amount owed might be negligible
due to the low rate of inmate wages. As discussed in Part II, in most instances,
inmate wages are not set at the prevailing or market rate—although the gross
wage would be used for FICA as it is for individuals who have wages
garnished outside of the prison system.105 For example, a worker earning
$1.15 per hour and working forty hours per week for fifty-two weeks per year
would earn a gross income of $2,392 annually. The tax for Social Security on
this amount would be $148.30 for both the employer and the employee. The
tax for Medicare would be $34.68 for each. This tax revenue would help fund
benefits for others but, as discussed in the next Section, not for working
inmates.106
B. Benefits of FICA
1. In General
In a statutory regime separate from the Internal Revenue Code, Congress
authorized the Social Security Administration to administer the Social
Security program and authorized the Department of Health and Human
Services’ Centers for Medicare and Medicaid Services to administer
Medicare.107 This administration is critical as Social Security and Medicare
101. Program Operations Manual System, supra note 100.
102. PETERSIK ET AL., supra note 58, at 52.
103. Mortiz-Rabson, supra note 4.
104. See I.R.C. § 3121(b)(6)(A).
105. See §§ 3121(a)(6), 3306(b)(6); 26 C.F.R. §§ 31.3102(a)(6)-1, 31.3306(b)(6)1, 31.3401(a)-1(b)(5) (2021).
106. See PETERSIK ET AL., supra note 58, at 26.
107. Allison Christians, Taxing the Global Worker: Three Spheres of International Social
Security Coordination, 26 VA. TAX REV. 1, 3 (2006); How Is Medicare Funded?,
MEDICARE.GOV, https://www.medicare.gov/about-us/how-is-medicare-funded [https://perma.c
c/2R8V-8XFS].

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are two of the largest entitlement programs in the United States, constituting
over 36% of federal expenditures in 2019.108 These programs are deemed
“entitlement programs” because their benefits are owed regardless of annual
appropriations legislation.109 A change in underlying legislation would be
required to alter payout structures.
To qualify for Social Security benefits, workers born after 1928 must
accumulate at least forty quarters of work in “covered employment.”110 A
quarter generally means the three-month calendar quarter that, in 2021,
generates at least $1,470 of wages (the threshold amount is adjusted each year
for inflation). However, if an employee’s earnings are not spaced evenly
throughout the year, the Social Security Administration divides the total
annual earnings by $1,470 to see how many quarters, up to four, the employee
could have earned.111 As of 2021, if a worker surpasses the forty quarter
threshold, the worker qualifies for full retirement benefits at age sixty-five,
sixty-six, or sixty-seven, depending on the worker’s year of birth.112 Choosing
to receive payments earlier (as early as sixty-two) reduces the annual benefit,
and delaying receipt until age seventy increases the annual benefit.113
Social Security benefits are calculated based on the beneficiary’s earnings
subject to Social Security taxes over his or her highest earning thirty-five-year
period.114 This salary index is allocated among three brackets—90%, 32%,
and 15%—at amounts that adjust annually with inflation.115 The retiree’s total
monthly benefit is a combination of each bracket.116

108. See OFF. OF MGMT. & BUDGET, HISTORICAL TABLES 60 tbl.3.2 (2021), https://www.
whitehouse.gov/wp-content/uploads/2020/02/hist_fy21.pdf [https://perma.cc/PN3W-SWS6].
109. See MCMAHON, supra note 71, at 504 (using the Social Security program as an
example of “mandatory spending,” meaning the expense is set by existing law rather than the
appropriations process).
110. Retirement Benefits, SOC. SEC. ADMIN., https://www.ssa.gov/benefits/retirement/pla
ner/credits.html [https://perma.cc/9YDE-9FS9].
111. See 42 U.S.C. § 414; Quarter of Coverage, supra note 58.
112. § 416(I)(1). For a full description of benefits, see SOC. SEC. ADMIN.,
UNDERSTANDING THE BENEFITS (2021).
113. § 402(w); Starting Your Retirement Benefits Early, SOC. SEC. ADMIN.,
https://www.ssa.gov/benefits/retirement/planner/agereduction.html [https://perma.cc/XH5X-85
U5].
114. §§ 401–434. For the federal government’s description of the formula process, see
Primary Insurance Amount, SOC. SEC. ADMIN., https://www.ssa.gov/OACT/COLA/piaformula.
html [https://perma.cc/2FGM-VJZB].
115. Primary Insurance Amount, supra note 114.
116. Id.

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Bracket

Average Indexed
Monthly Earnings (AIME)

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Entitlement

Lowest Bracket

Up to $996

90% of AIME

Middle Bracket

Between $996 and $6,002

32% of AIME

Highest Bracket

Between $6,002 and $11,900

15% of AIME

The income a person earns above FICA’s ceiling—$142,800 in 2021—is not
considered in this calculation and is not taxed.117
The percentages used for calculating benefits provides a greater return for
lower income wage earners.118 The result is that the return for workers who
pay into Social Security and are in the bottom 20% of earners is almost three
times greater than that of the top 20%.119 Their benefits, when viewed as a
percentage of their lifetime average income and as a percentage of their total
Social Security benefits, are more than those with higher lifetime average
incomes.120
In addition to the Social Security benefits a worker may receive, the
worker’s spouse, children, and parents may also receive benefits based on the
worker’s qualification.121 Benefits can be paid to a child or spouse even if the
worker does not have the required number of credits (one credit per qualifying
quarter) so long as the worker had credits for eighteen months in the three
years immediately preceding death.122 In limited circumstances, reduced
benefits are available at age sixty, or possibly earlier, if the recipient is
disabled, an un-remarried widow or widower, or an unmarried child.123 With
exceptions, a parent can receive benefits if the worker provided at least half
of the parent’s support and the parent is not personally entitled to receive a
larger benefit.124 There is a limit—generally between 150% and 180% of the
basic benefit rate—on the combined amount family members can receive;
excess benefits are reduced proportionally.125
On the other hand, some individuals pay FICA but find their contributions
are not used to calculate their benefits. For example, if one spouse’s benefits
117. Contribution
and
Benefit
Base,
SOC.
SEC.
ADMIN.,
https://www.ssa.gov/OACT/COLA/cbb.html [https://perma.cc/3T5L-RETU].
118. See CONG. BUDGET OFFICE, IS SOCIAL SECURITY PROGRESSIVE?, at 1 (2006).
119. Id.
120. Id.
121. For the federal government’s description of survivor benefits, see Planning for Your
Survivors, SOC. SEC. ADMIN., https://www.ssa.gov/benefits/survivors/onyourown.html [https://
perma.cc/9ASX-DJLT].
122. Id.
123. Id.
124. 42 U.S.C. § 402(h)(1).
125. § 403(a).

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are sufficiently greater than the other spouse’s benefits, the spouse with lower
benefits can choose 50% of the greater benefits and receive no benefit from
his or her personal contributions.126 More detrimental to recipients is that,
although U.S. residency is typically not required, benefits may be suspended
if an individual lives in certain countries, such as North Korea or Cuba, or
lives abroad for more than six months.127 Also, undocumented workers are
generally denied benefits unless a change in status entitles them to recognition
of prior contributions.128
Medicare Part A benefits are available if workers are sixty-five years or
older, have been permanent legal residents for five continuous years, and they
or their spouse (or qualifying ex-spouse) have paid Medicare taxes for at least
forty quarters of covered work.129 If contributions were for less than forty
quarters, workers must pay monthly premiums for Part A coverage.130 In
2019, Medicare covered 61.2 million individuals and had an average growth
of 6.5% in incurred outlays—compared to a 4.1% growth in gross domestic
product—constituting over 14% of the federal budget.131
The lifetime benefits of Social Security and Medicare are significant and
estimated to be greater (on average) than FICA recipients’ pay.132 Largely as
a result of increasing Medicare costs, benefits are also expected to grow
significantly in future decades. Consequently, some couples pay only 70% of
their retirement benefits in FICA.133
Possibly a lesser known FICA benefit is the provision of disability
benefits. Technically, there are two disability programs operated through
126. § 402(b)(2), (c)(2); 20 C.F.R. §§ 404.330(d), 404.333 (2021).
127. SOC. SEC. ADMIN., YOUR PAYMENTS WHILE YOU ARE OUTSIDE THE UNITED
STATES 1, 3 (2020) (providing a discussion of payment limitations).
128. For a discussion of the tax treatment of undocumented workers, see Luz Arévalo et
al., Who Said Your Immigrant Client Cannot Get Credit for Social Security Payments?, 19
BENDER’S IMMIGR. BULL. 1181, 1181–86 (2014); Stephen Goss et al., Soc. Sec. Admin., Effects
of Unauthorized Immigration on the Actuarial Status of the Social Security Trust Funds,
ACTUARIAL NOTE NO. 151, Apr. 2013, at 5; Francine J. Lipman, The Taxation of Undocumented
Immigrants: Separate, Unequal, and Without Representation, 9 HARV. LATINO L. REV. 1, 5–6
(2006).
129. 42 U.S.C. § 1395c; 20 C.F.R. §§ 406.5(b), 406.11(b), 406.20(b) (2021); see also 42
U.S.C. § 413(a) (defining “quarter” and “quarter of coverage”); id. § 414(a) (requiring forty
quarters of coverage for an individual to be considered “fully insured”).
130. 42 U.S.C. §§ 1395i-2(a)(4), 1395i-2a(a)(2)(c)(3).
131. BD. OF TRUSTEES, FED. HOSP. INS., & FED. SUPPLEMENTARY MED. INS. TR. FUNDS,
2020 ANNUAL REPORT 6, 180 (2020); see OFF. OF MGMT. & BUDGET, HISTORICAL TABLES 50
tbl.3.2 (2021), https://www.whitehouse.gov/wp-content/uploads/2020/02/hist_fy21.pdf [https://
perma.cc/PN3W-SWS6] (providing a breakdown of federal outlays); Budget Basics: Medicare,
PETER G. PETERSON FOUND. (July 29, 2020), https://www.pgpf.org/budget-basics/medicare
[https://perma.cc/ZC4T-5BT8].
132. Eugene Steuerle & Adam Carasso, Lifetime Social Security and Medicare Benefits,
STRAIGHT TALK ON SOC. SEC. & RET. POL’Y, Mar. 2003, at 1, 2.
133. Id.

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Social Security: Social Security Disability Insurance (SSDI), for those who
worked long enough and paid Social Security taxes, and Supplemental
Security Income (SSI), which pays based on financial need.134 SSDI is funded
with FICA and is payable to disabled workers who have completed at least
twenty quarters of coverage during the previous forty quarters (or five of the
past ten years) in a job or multiple jobs where Social Security taxes were
withheld.135 Alternatively, SSI is funded by general government funds.136
In October 2020, SSDI and SSI made payments to over 9.6 million
beneficiaries.137 Similar to Social Security payments, payments of SSDI are
based on average past earnings.138 In October of 2020, the average monthly
disability payment was $1,128, and monthly benefits paid from the Disability
Insurance Trust Fund totaled almost $11 billion.139 Payments of SSI are tied
to income, and more than 8 million payments averaged $580 per month.140
Unlike Social Security, disability benefits are not automatically awarded;
SSDI and SSI only apply if an individual cannot work because of a severe
medical condition that is expected to last at least one year or result in death.141
Although payment amount is not tied to the severity of a worker’s disability,
the medical condition must significantly limit the worker’s ability to do basic
work activities.142 Applicants’ doctors are now given controlling weight in
that determination, which has resulted in a larger percentage of claimants
having low-mortality disorders, such as mental illness and back pain.143
Social Security, Medicare, and SSDI operate as primary components of
the American social safety net and provide their benefits only to those who
qualify through employment.144 By tying benefits to employment, these
programs reinforce and validate worker status. Only through worker status
can Americans maximize assistance in the event they are unable to take care
of themselves.
134. 42 U.S.C.§§ 401–434; §§ 1381–1385.
135. § 423(c); 20 C.F.R. § 404.130(b) (2021).
136. Understanding Supplemental Security Income (SSI) Overview–2020 Edition, SOC.
SEC. ADMIN., https://www.ssa.gov/ssi/text-over-ussi.htm [https://perma.cc/F9N6-AL38]. For a
discussion of how the United States has historically funded social security programs, see Patricia
P. Martin & David A. Weaver, Social Security: A Program and Policy History, 66 SOC. SEC.
BULL., no. 1, 2005, at 3–10.
137. SOC. SEC. ADMIN., MONTHLY STATISTICAL SNAPSHOT, OCTOBER 2020 tbls.2 & 3
(2020).
138. 42 U.S.C. § 1382.
139. SOC. SEC. ADMIN., supra note 137, at tbl.2.
140. Id. at tbl.3.
141. § 423(d)(2)(A)–(B).
142. § 423(d)(2)(A).
143. 20 C.F.R. § 404.1527(c) (2021).
144. David Autor et al., Disability Policy, Program Enrollment, Work, and Well-Being
Among People with Disabilities, 80 SOC. SEC. BULL., no. 1, 2020, at 57.

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2. Prison Specifics
Although inmate workers may be aware that Congress denies them Social
Security and disability benefits they might have previously earned—an
exclusion that dates back to the original Social Security Act145—they may
reasonably assume they are working toward benefits similar to those workers
receive outside of the prison industrial complex. That assumption is generally
untrue, having repercussions not only for current and former inmates but also
for their families and communities. If inmates are otherwise unable to meet
requisite thresholds, their spouses, children, and parents may fail to qualify
for benefits,146 thus reducing resources in communities that are already
struggling in the absence of incarcerated members.
Inmate labor does not earn toward benefits for two reasons: first, it is
carved out of the statute defining covered employment, and second, even
when it may constitute covered employment (as with some PIECP jobs), most
inmates do not earn sufficient income per quarter to surpass the statutory
thresholds.147 Because gross wage income must be more than $5,880 annually,
or $490 per month, to earn a full year of credits,148 the low wages paid to
inmates are a double-edged sword. Inmates have less disposable income in the
first instance and are less likely to be entitled to the social safety net upon
release and retirement. If inmates can surpass the threshold, their low wages
are partially compensated for by Medicare coverage and the progressive
payout structure of Social Security. Social Security benefits are, in fact,
intended to help low-income retirees stay out of poverty and give the greatest
return to those who earned the lowest wages—unless the wages were earned
during incarceration.149

145. 42 U.S.C. § 402(x); Social Security Act of 1935, ch. 531, 49 Stat. 620, § 3(a)(1); see
also I.R.C. § 32(c)(2)(B)(iv) (excluding an earnings received for services provided while
incarcerated from counting toward an inmate’s earned income tax credit); Rogers v. Comm’r,
88 T.C.M. 392, 392 (2004) (highlighting that status as an inmate is the determinative factor and
noting that the exclusion applies to services performed at a location outside the penal institution,
as well as to services paid for by private entities); Wilson v. Comm’r, 81 T.C.M. 1745, 1748
(2001) (“[A]ll wages for services provided by inmates of penal institutions are expressly
excluded from the earned income credit . . . .”).
146. See supra notes 121–122 and accompanying text.
147. 42 U.S.C. §§ 410(a)(6)(A), 418(c)(6)(B) (prohibiting states from voluntarily
extending coverage by contract); see supra Part II.
148. See SOC. SEC. ADMIN., UPDATE 2021 (2021) (noting that an individual can receive a
maximum of four credits). In 2020, individuals had to earn $1,410 to receive one credit, and in
2021, individuals must earn $1,470 to receive one credit. Id. Thus, in 2020, individuals had to
earn at least $5,640 annually to receive their maximum number of credits, and in 2021,
individuals will have to earn $5,880 to receive the same. See id.
149. CONG. BUDGET OFF., supra note 118, at 1.

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For disability benefits, Congress greatly limits when inmates may claim
those benefits. First, Congress generally denies payments to inmates while
they are confined, although it does permit payments to an inmate’s family
members if those family members would otherwise receive benefits based on
the inmate’s prior qualification.150 Second, Congress also prohibits payments
for physical or mental impairments that arise in the commission of a felony or
during imprisonment for a felony.151 Third and finally, because inmate labor
is not covered employment, it does not qualify toward the threshold of credits
(albeit a lower one) necessary to earn the right to SSDI.152
Although the injustice of not covering inmate employment applies to all
inmates, it is impossible to calculate how many lose their benefit qualification
as a result of this exclusion. Prisons either fail to release or fail to maintain
sufficient data to determine how many, or which, inmates would earn quarters
while within the prison system to combine this information with inmates’
prior work experiences.153 Therefore, despite knowing that more than 600,000
inmates were released from prison in 2019 and that nearly one in three
individuals have some type of criminal record, only indirect information can
gauge the impact of this exclusion.154
From the information that can be gathered, it is likely harder for
inmates—particularly inmates of color—to surpass the thresholds established
by Social Security, Medicare, and SSDI because they do not have long
employment periods outside of prison to earn coverage.155 Although the
average time served by inmates is approximately three years, some inmates
have longer periods of incarceration, and recidivism remains a problem.156
150. 42 U.S.C. § 402(x)(2).
151. § 423(d)(6); see also Social Security Amendments of 1981, Pub. L. No. 97-123, 95
Stat. 1659, § 6(3) (codified at 42 U.S.C. § 423) (allowing the Department of Health and Human
Services access to Social Security numbers to ensure ineligible prisoners do not receive
disability).
152. 42 U.S.C. §§ 402(x)(2), 423(j).
153. Press Release, Bernadette Rabuy & Daniel Kopf, Prison Pol’y Initiative, Prisons of
Poverty: Uncovering the Pre-Incarceration Incomes of the Imprisoned (July 9, 2015),
https://www.prisonpolicy.org/reports/income.html [https://perma.cc/2C6T-EX54].
154. E. ANN CARSON, U.S. DEP’T OF JUST., PRISONERS IN 2019, at 13–14 tbl.8 (2020);
Gary Fields & John R. Emshwiller, As Arrest Records Rise, Americans Find Consequences Can
Last a Lifetime, WALL ST. J. (Aug. 18, 2014), https://www.wsj.com/articles/as-arrest-recordsrise-americans-find-consequences-can-last-a-lifetime-1408415402 [https://perma.cc/4CCH-SZ
GK].
155. To be covered, an individual typically must earn forty credits. See § 414(a). A
maximum of four can be earned a year, and thus, it generally takes ten years for an individual to
earn all forty credits. See § 414(a)(3).
156. MARK MOTIVANS, U.S. DEP’T OF JUST., FEDERAL JUSTICE STATISTICS, 2012 STATISTICAL TABLES 39 tbl.7.11 (2015) (highlighting that the average time served by federal
prisoners was 37.5 months); DANIELLE KAEBLE, U.S. DEP’T OF JUST., TIME SERVED IN STATE

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The average age of inmates in the federal system is forty-one, and the average
sentence imposed is 11.75 years, with 97% of inmates required to serve a
period of supervision after release.157 In 2019, 34.3% of prisoners were
sentenced between ten and twenty years, 14.4% were sentenced to twenty
years or more, and 2.6% were sentenced to life.158 Over 11% of federal
prisoners are fifty-six and older, putting these prisoners at risk of never
qualifying for benefits if they had not done so before imprisonment.159
Moreover, of state prisoners released in 2005, 44% were arrested at least once
in the next year, and 83% were arrested at least once during the nine-year
period following release—shortening their lifetime earning capacity.160
Exactly how many individuals spend a significant chunk of their working lives
behind bars is impossible to quantify.
The time lost by 5 million formerly incarcerated individuals also hinders
their ability to gain employment upon release, making it all the more difficult
to qualify for the social safety net.161 Even before COVID-19, of individuals
aged twenty-five to forty-four who wished to work, the unemployment rate of
formerly incarcerated individuals was 27.3%, compared to 5.8% for the
general public.162 Thus, even though some studies have shown these
individuals are more stable employees than their peers, incarceration
PRISON, 2016, at 1 (2018) (noting that the majority of violent offenders released from state prison
in 2016 served less than three years); see also MARIEL ALPER ET AL., U.S. DEP’T OF JUST., 2018
UPDATE ON PRISONER RECIDIVISM: A 9-YEAR FOLLOW-UP PERIOD (2005–2014), at 1 (2018)
[hereinafter PRISONER RECIDIVISM] (highlighting that 83% of state prisoners released across
thirty states in 2005 were arrested at least once within nine years).
157. U.S. SENTENCING COMM’N, QUICK FACTS - FEDERAL OFFENDERS IN PRISON - MAY
2019, at 1, 2 (2019).
158. Id. at 2.
159. See
Inmate
Age,
FED.
BUREAU
OF
PRISONS,
https://www.bop.gov/about/statistics/statistics_inmate_age.jsp [https://perma.cc/SHZ8-MQR
D].
160. PRISONER RECIDIVISM, supra note 156, at 1.
161. Shannon et al., supra note 2, at 1796, 1804; see also Elizabeth Westrope, Employment
Discrimination on the Basis of Criminal History: Why an Anti-Discrimination Statute Is a
Necessary Remedy, 108 J. CRIM. L. & CRIMINOLOGY 367, 370 (2018); Lucius Couloute &
Daniel Kopf, Out of Prison and Out of Work: Unemployment Among Formerly Incarcerated
People, PRISON POL’Y INITIATIVE (July 2018), https://www.prisonpolicy.org/reports/outofwork
.html [https://perma.cc/6HN3-BHS6]; Sandra J. Mullings, Employment of Ex-Offenders: The
Time Has Come for a True Antidiscrimination Statute, 64 SYRACUSE L. REV. 261, 263–64
(2014). For a discussion on the effects of incarceration for black and white men, see Devah Pager
& Lincoln Quillian, Walking the Talk? What Employers Say Versus What They Do, 70 AM.
SOCIO. REV. 355, 365–66 (2005) (finding that race was an immaterial factor regarding the
likelihood of ex-convict receiving a callback). But see Devah Pager, The Mark of a Criminal
Record, 108 AM. J. SOCIO. 937, 960–62 (2003) (finding that, although substantial barriers to
employment exist for all individuals with prior felony convictions, such barriers are much higher
for African-American males than their white counterparts).
162. Couloute & Kopf, supra note 161, at fig.1.

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negatively impacts wage growth by approximately one-third.163 So it should
be unsurprising that a study by the Brookings Institution found that the
majority of recently released individuals receive salaries at or below the
federal minimum wage.164
Finally, former inmates are more likely to be from poor backgrounds and
communities with higher unemployment levels.165 One study from 2014
found that the median annual income for incarcerated individuals before
prison was $19,185—falling well below that of similar non-incarcerated
individuals even within the same race and gender.166 The intersectionality of
poverty with race only aggravates these problems. For African-American
males, the civilian noninstitutional unemployment rate in October 2020 was
11.5%, compared to 5.8% for white males.167 As a result, it is reasonable to
conclude many inmates did not enter prison with numerous quarters earned
under FICA and will face hurdles seeking employment upon release.
Moreover, because communities of color generally have high unemployment
rates on a national level,168 failing to recognize work during incarceration
means less of the social safety net flows into them.
These inequities are starker for wrongfully incarcerated individuals, of
whom, as of 2016, at least 47% were African-American; more may have been
African-American but not included in this statistic.169 More, certainly, were
of other minority groups. Although several states provide payments to those
wrongfully imprisoned—for example, Ohio pays $56,752.36 annually
(adjusted every two years for inflation)—these payments may pale in

163. Theodore S. Corwin III & Daniel K.N. Johnson, Plus a Life Sentence?
Incarceration’s Effects on Expected Lifetime Wage Growth 16 (Colo. Coll., Working Paper No.
2019-03, 2019); Jennifer Hicks Lundquist et al., Does a Criminal Past Predict Workers
Performance? Evidence from America’s Largest Employer, 96 SOC. FORCES 1039, 1040 (2018);
Dylan Minor et al., Criminal Background and Job Performance, 7 IZA J. LAB. POL’Y, no. 8,
2018, at 1, 2, 32.
164. ADAM LOONEY & NICHOLAS TURNER, BROOKINGS INST., WORK AND
OPPORTUNITY BEFORE AND AFTER INCARCERATION 1 (2018).
165. Id. at 14.
166. See Rabuy & Kopf, supra note 153.
167. Table A-2. Employment Status of the Civilian Population by Race, Sex, and Age, U.S.
DEP’T OF LAB. STATS. (Jan. 8, 2021) https://www.bls.gov/news.release/empsit.t02.htm
[https://perma.cc/KSC4-PR2C].
168. LOONEY & TURNER, supra note 164, at 2, 15–16.
169. SAMUEL R. GROSS ET AL., RACE AND WRONGFUL CONVICTIONS IN THE UNITED
STATES 1 (2017), http://www.law.umich.edu/special/exoneration/Documents/Race_and_Wrong
ful_Convictions.pdf [https://perma.cc/8HE8-YHET]; Matthew Clarke, Racism and Wrongful
Convictions, CRIM. LEGAL NEWS (May 15, 2020), https://www.criminallegalnews.org/news/20
20/may/15/racism-and-wrongful-convictions/ [https://perma.cc/9AR9-DPT6]. Special thanks to
Larry Y. Lee who raised this issue in a paper for Professor Bridget Crawford of Pace Law School
as a result of the Symposium.

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comparison to the loss of future benefits.170 Additionally, these payments
were not created with an understanding that they were substituting a
wrongfully convicted individual’s right to Social Security and Medicare.
For those who were not absolved of their crimes, the problems referenced
in this Article will not be solved by the current shift away from incarceration
and toward confinement within the community, but they may be mitigated
depending on the terms of confinement.171 However, if this form of
punishment provides food and shelter either directly or indirectly, the
confined person still qualifies as an inmate for purposes of the FICA
exclusions.172 As an example of the potential traps of confinement, individuals
can only retain SSI benefits if they are not provided food and shelter; even
inmates absent from institutions for up to fourteen consecutive days retain
inmate status.173 Thus, larger changes to FICA are needed to address the
problems that exist today.
The negative impact of excluding inmate labor from FICA, and its
corresponding reduction of opportunities to earn into the American social
safety net, impacts all inmates but has a disproportionate impact on racial
minorities. Although only 3% of the total U.S. adult population has been
imprisoned, 15% of the African-American adult male population has been.174
The intersection of race and poverty among those incarcerated emphasizes the
harms of this exclusion. The harm can be somewhat lessened by recognizing
inmate labor and permitting inmates to earn benefits to the same extent as
other workers.
IV. PROPOSAL
For the reasons outlined in Part III, Congress should repeal the sections
of the Internal Revenue Code that exclude prison labor from the FICA regime.
This would require employers and employees to report and pay taxes on
inmates’ wages. However, even with this step, inmates working under prison
work assignments and FPI labor are unlikely to earn income sufficient to
170. Letter from Keith Faber, Auditor, State of Ohio, to Anderson M. Renick, Clerk of Ct.,
Ohio Ct. of Claims (Jan. 27, 2021) (on file with author).
171. Faith E. Lutze et al., The Future of Community Corrections Is Now: Stop Dreaming
and Take Action, 28 J. CONTEMP. CRIM. JUST. 42, 54 (2012); VERA INST. OF JUST., THE NEW
DYNAMICS OF MASS INCARCERATION 1 (2018).
172. 20 C.F.R. § 416.201 (2021).
173. § 416.211(a)(2), (c)(2); see Program Operations Manual System (POMS), SOC. SEC.
ADMIN. (Sept. 11, 2013), https://secure.ssa.gov/apps10/poms.nsf/lnx/0500520009 [https://perm
a.cc/8AH9-DWQN].
174. Shannon et al., supra note 2, at 1814; see also CARSON, supra note 154, at 16 tbl.20
(highlighting that, in 2019, black men were approximately 5.7 times more likely to be
imprisoned than white men and noting that this trend occurred in teens, too, as black males ages
eighteen to nineteen were twelve times more likely to be imprisoned than their white peers).

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qualify for quarters of credit under Social Security, Medicare, and SSDI.
Recognizing the political difficulty of mandating a minimum wage for prison
labor, FICA needs to establish a minimum wage and require employers—in
this case, prisons or private businesses employing inmates—to pay both
halves of FICA.
First, in the easier context of PIECP employment where inmates are owed
prevailing wages, inmates and employers currently contribute to FICA despite
its ambiguity.175 To the extent employment is based on a prevailing wage, that
wage should generate sufficient earnings that permit inmates to gain four
quarters of credit per year. Even though inmates receive a lower postgarnishment amount when compared to others, it is their pre-garnished wages
that count toward FICA. Some allege the PIECP program is abused and the
pre-garnished wage remains below the prevailing wage—possibly illustrated
by the low average wage discussed in Part II.176 Consequently, because inmate
workers have little power against their employers, the presumption should be
in their favor; when workers do not earn four quarters per year, an
investigation should determine the reason for that failure.
For prison work assignments and FPI labor, because little to no wages are
required by current systems, inmates are unlikely to earn even one quarter per
year despite working full-time. In recognition of this injustice, Congress
should either mandate the payment of a federal minimum wage or create an
alternative measure for these benefits. Because the first option has not been,
and is unlikely to become, politically popular,177 Congress should develop an
175. See Program Operations Manual System (POMS), SOC. SEC. ADMIN. (Aug. 19,
2008), https://secure.ssa.gov/apps10/poms.nsf/lnx/0301901560 [https://perma.cc/Q2KW-WPX
L].
176. See Bob Sloan, The Prison Industries Enhancement Certification Program: Why
Everyone Should Be Concerned, PRISON LEGAL NEWS (Mar. 15, 2010),
https://www.prisonlegalnews.org/news/2010/mar/15/the-prison-industries-enhancement-cert
ification-program-why-everyone-should-be-concerned/ [https://perma.cc/BVX8-T9AF]. Some
prisons avoid the requirement of paying working prisoners prevailing wages by implementing
training programs, which allow the institutions to limit paid wages. Id. At any time, prisoners
can be moved from one training program to another. Id. Consequently, prisoners may work for
years before qualifying to receive the prevailing wages to which they are entitled. Id.; see also
William P. Quigley, Prison Work, Wages, and Catholic Social Thought: Justice Demands
Decent Work for Decent Wages, Even for Prisoners, 44 SANTA CLARA L. REV. 1159, 1164
(2004) (noting that many prisoners working in federal prisons are employed by UNICOR, a
government-owned corporation, and do not receive real wages).
177. See U.S. GOV’T ACCT. OFF., PRISON LABOR: PERSPECTIVES ON PAYING THE
FEDERAL MINIMUM WAGE 2, 7 (1993); Editorial, No Higher Wages for Inmates, DAILY
GAZETTE (Feb. 8, 2019), https://dailygazette.com/2019/02/08/editorial-no-higher-wages-forinmates/ [https://perma.cc/U63R-UY5D]; Should Prisoners Be Paid Minimum Wage?, THE
TYLT (Dec. 30, 2016), https://thetylt.com/politics/should-prisoners-be-paid-minimum-wage
[https://perma.cc/YQH8-3Q5H]; Lauren Castle & Maria Polletta, Some Prisoners in Arizona

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alternative measure to quickly mitigate harm and ensure the proper
recognition of inmate labor.
One possibility would be to eliminate the tax component of these benefit
systems and treat inmates engaged in full-time prison labor as earning four
quarters of credit per year. This option was used in 1972 when Congress
attempted to mitigate the injustice of Japanese-American internment during
World War II.178 Although a different context, Congress awarded formerly
interned citizens of Japanese ancestry non-contributory Social Security credits
if they were aged eighteen or older.179 This resulted in them receiving credit
toward Social Security for their period of internment, and they were not
required to contribute financially for those credits.180
In the context of prison labor, this option presents two problems. First,
this approach does not generate new tax revenue. In the more limited context
of internment, Congress authorized general revenue funds to make the Social
Security and Medicare systems whole, but that option is less viable with the
significantly larger prison population.181 Second, simply providing credits
designates no clear value for calculating future benefits. For former internees,
the credits and value for future benefits were based on the prevailing minimum
wage or the individual’s prior earnings, whichever was larger.182 Although the
second problem can be fixed by assuming a minimum wage based on a fixed
federal rate or the inmate’s employment history, this assumption would not
address the lack of tax revenue.
Another possibility would be to require the payment of FICA on deemed
wages set at the minimum wage. Under this alternative, inmates would not
earn minimum wage but would be treated as doing so for purposes of
calculating their credits and future Social Security benefits. This would
minimally increase the tax burden on both the employer and the inmate. For
a thirty-hour per week job paying $7.25 per hour, the employee portion of the
tax would be $13.49 per week. Nonetheless, based on their current net pay,
many inmates would be unable to make that contribution.
Consequently, the employee’s portion of FICA should be borne by their
employers. This tax shifting is unusual but not unprecedented. Members of
Make 10 Cents per Hour—Should They Get a $3 Minimum Wage?, AZ CENT. (Feb. 7, 2020),
https://www.azcentral.com/story/news/local/arizona/2020/02/07/arizona-lawmaker-proposes3-per-hour-minimum-wage-prisoners/4681453002/ [https://perma.cc/5MKT-BNEQ]; Joseph
Spector, Big Raise? Prison Inmates Could Get a Major Boost in Their
Wages in New York, DEMOCRAT & CHRON. (Feb. 7, 2019), https://www.democratandchronicle.
com/story/news/politics/albany/2019/02/07/big-raise-prison-inmates-could-get-major-boostminimum-wages-new-york/2799895002/ [https://perma.cc/QTP5-7Z3F].
178. Social Security Amendments of 1972, Pub. L. No. 92-603 § 231, 86 Stat. 1329.
179. 42 U.S.C. § 431(b)(1).
180. See § 431(b)(1), (3).
181. § 431(c).
182. § 431(b)(1)(A)–(B).

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religious orders who have taken a vow of poverty are ordinarily exempt from
FICA and are not covered by Social Security, but orders can make irrevocable
elections to cover their members and employees.183 In cases of election, the
order pays the employer and employee portions of FICA taxes.184 Congress
could adopt a similar approach for inmates because, with current wage rates,
they have all but taken such a vow. This would have a secondary benefit of
forcing employers (whether prisons or private businesses) to internalize the
costs of prison labor. In a limited way, imposing the tax would equalize
businesses’ costs and simultaneously address any concerns that prison labor
is cheaper than other types of labor.
A problem with this approach is that the federal minimum wage is not the
prevailing wage in all communities, and as a result, a different valuation is
likely fairer. Several states have raised their minimum wages above $7.25 per
hour, which could lead to an argument for a higher valuation.185 Nonetheless,
it is unlikely that any one value should govern all inmates within a state. One
valuation alternative—derived from how the government approaches
members of religious orders who have taken vows of poverty—is to assign a
wage amount based on the fair market value of room and board, clothing, and
other perquisites inmates receive.186 Although this would create
inconsistencies in the treatment of employed and unemployed inmates
because they are all are provided similar goods, this approach better
approximates the value of services that inmates receive.
With either approach for putting an artificial value on inmate labor,
inmate workers can enjoy credits toward the American social safety net. The
proposal does not require inmates be given benefits upon reaching the
retirement age, but it identically recognizes inmate labor and labor conducted
outside of prison. The same number of quarters would be required to earn
benefits. Denying this treatment for employees who have worked the requisite
quarters but have done so behind bars is an unconscionable use of punishment
beyond that imposed by the criminal justice system.
This Article recognizes there may be a slight increase in adverse
incentives created by its proposal, but this increase is so small in the context
of Social Security, disability, and Medicare that it should be properly set aside.
183. § 410(a)(8)(A)–(B); see Program Operations Manual System (POMS), SOC. SEC.
ADMIN. (Aug. 22, 2005), https://secure.ssa.gov/apps10/poms.nsf/lnx/0301901620 [https://perm
a.cc/5ZPC-QUJT]; 20 C.F.R. § 404.1046(a) (2021); I.R.C. § 3121(r)(1); Samson v. United
States, 743 F.2d 884, 887 (Fed. Cir. 1984) (holding that payment for work done by a member of
a religious organization for an unrelated third party was taxable income).
184. See Program Operations Manual System (POMS), supra note 183.
185. State Minimum Wages, NAT’L CONF. STATE LEGISLATURES (Jan. 8, 2021),
https://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx [https://
perma.cc/7FJZ-MB8G].
186. I.R.C. § 3121(i)(4).

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The risk that individuals in high unemployment areas or with few employable
skills will seek entry into the prison system to earn toward future benefits is
low. If the wage system permitted qualification in a sufficiently short period
and if jobs were guaranteed, this risk would be greater. But it would still be
unlikely to overcome the many reasons individuals avoid incarceration. This
risk could be greater if inmates were entitled to other benefits upon release,
such as unemployment, because those benefits would be more immediate.
Due to the different incentive effects, however, unemployment will be
discussed fully in a future article.
With respect to Social Security, disability, and Medicare, this Article
contends that, even with imperfections, a proper valuation regime can
recognize the value of inmate labor. Whether tied to the federal minimum
wage or some other measure, generally prevailing thresholds could be
satisfied, allowing inmates to earn toward requisite quarters. The taxes due on
inmate wages could be assigned to the employer, thereby raising the funding
revenue for future benefits while also forcing employers to internalize the
costs of inmate labor.
V. CONCLUSION
The United States’ high incarceration rate has many consequences of
which policy makers and the public may be unaware. One of those
consequences is that inmates who are employed—whether for prisons, prison
industries, or private employers—are all working hard, but from the
perspective of Social Security, disability, and Medicare, they are hardly
working. Their work is largely ignored for purposes of the American social
safety net.
When inmates are not allowed to contribute to the FICA tax base, they
are not earning toward the benefits these taxes fund. That harsh reality applies
not only to inmates themselves but also to their dependents who may be
affected to the extent inmates never qualify for benefits. This increases the
chance that members of highly incarcerated populations, especially AfricanAmerican and other minority populations, may find themselves without the
Social Security, disability, and Medicare benefits expected from working long
stretches of their lives—all because their work is defined as not, in fact, being
work.
This Article argues that the discriminatory exclusion of most prison labor
from FICA and its related benefit programs should be repealed. This change
would permit a larger number of former inmates and their families to benefit
from the American social safety net. However, simply repealing the current
exclusion is insufficient. As long as the majority of prison labor pays submarket wages, many incarcerated laborers will not earn toward future benefits

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despite a life of work. Therefore, a more significant change is required by
either mandating a minimum wage or creating an equivalent valuation for
FICA. Doing so acknowledges that inmate labor is valuable and should
receive societal recognition.
Changing this regime is not a difficult decision to make. An expansion of
Social Security and Medicare is consistent with the growth these programs
have experienced since their inception. The original Social Security Act of
1935 covered less than 60% of the workforce; by 1981, Social Security
covered over 88%, and today, it covers more than 90%.187 The difficulty is
deciding Social Security’s value for the formerly incarcerated. Policy makers
must accept a valuation of prison labor and, by doing so, mitigate the
administrative difficulties of operating the revised regime. It is time for all
workers to be recognized for purposes of the American safety net.

187. William J. Nelson Jr., Soc. Sec. Admin., Employment Covered Under the Social
Security Program, 1935–1984, 48 SOC. SEC. BULL., Apr. 1985, at 33, 33; Melissa M. Favreault,
Why Do Some Workers Have Low Social Security Benefits?, RET. POL’Y PROGRAM, June 2010,
at ii, 1 n.2.

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