September/October 2004
Using prisoners to recycle old electronics is seen by supporters as a productive way to rehabilitate criminals. Others claim the practice is environmentally unsound and represents unfair competition. Here’s the latest on this controversial debate.
By Robert L. Reid
Imagine an electronics recycling operation that pays no federal or state taxes, doesn’t have to worry about OSHA or EPA inspections, pays its employees as little as 23 cents an hour, never has to worry about labor unions, yet has a long waiting list of would-be workers. Plus, the operation has an almost guaranteed customer base and access to as much as $20 million in financing that’s backed by the full faith and credit of the U.S. Treasury.
Sounds great, doesn’t it? OK, but those eager workers have, on average, only an eighth-grade education, their productivity is about one-fourth of what your competitors can expect from their employees, yet your operation is required by law to hire as many of them as possible and to employ them in a labor-intensive manner (forget about using automation). Plus, many of them have had a drug problem, and you know for a fact that they all have criminal records.
Welcome to the exciting and ever-changing world of using prisoners to recycle electronics.
The recycling operation mentioned above is known as Unicor, which is the trade name for Federal Prison Industries (FPI), a branch of the U.S. Department of Justice. Created in 1934, Unicor employs thousands of inmates at federal prisons across the country in operations that range from making clothing (including body armor for police officers) and office furniture to services such as telemarketing and electronics recycling.
Though Unicor was intended to make products for sale only to the federal government, critics charge that the aforementioned services have gone beyond that mandate. They point to large companies such as computer manufacturer Dell Inc. (Round Rock, Texas), which have used Unicor’s inmate labor for jobs that could be filled by private workers.
In fiscal year 2002, Unicor employed some 21,778 inmates across the country and posted net sales of $678.7 million. At the same time, Unicor purchased its raw materials from the private sector, spending nearly $426 million in 2001 and more than $502 million in 2002, according to Unicor’s 2002 annual report.
The electronics recycling portion of Unicor started in 1994 and has grown rapidly. In September 2002, for example, the firm had 833 inmates at seven federal facilities engaged in electronics recycling and net sales of $3.4 million. One year later, the net sales for recycling had more than doubled to just over $8 million dollars, while overall Unicor sales had declined to $666.7 million, according to an independent audit by PricewaterhouseCoopers L.L.P. (Washington, D.C.). The number of inmates handling obsolete electronics also rose to more than 1,000 by the summer of 2004, Unicor reports.
Unnecessary Exposure?
Though still a small part of Unicor’s overall operations, the electronics recycling portion has attracted considerable bad publicity. Critics argue that Unicor endangers both workers and the environment while also hindering the development of an e-recycling infrastructure because of the perceived unfair competitive advantage it enjoys.
On the environmental side, these critics charge that inmates are “unnecessarily exposed” to hazardous materials and physical injuries, according to a June 2003 report from the Silicon Valley Toxics Coalition (SVTC) (San Jose, Calif.) and the Computer TakeBack Campaign. That report, Corporate Strategies for Electronics Recycling:
A Tale of Two Systems, decried what SVTC called Unicor’s “backward” operations at the federal penitentiary in Atwater, Calif., which recycled electronics for Dell and other clients. Conversely, the report praised the partnership between Hewlett-Packard Co. (Palo Alto, Calif.) and Micro Metallics Corp. (Roseville, Calif.), now renamed Noranda Recycling Inc., as an example of some of “the best recycling practices” SVTC had seen.
For instance, while the Micro Metallics operation uses “mechanized systems, such as crushers, that reduce worker exposure to toxics,” the Unicor-Atwater facility relies on hammers to manually smash leaded glass in cathode-ray tubes because security concerns restrict the kinds of tools available to prisoners, making “their work less efficient and more dangerous,” SVTC charged. Moreover, the inmates “toil outside the protection of state and local environmental and labor regulations that private sector recyclers must follow.” SVTC concluded that Unicor “used practices disturbingly similar to those found in developing nations” and compared Unicor’s approach to “the equivalent of breaking rocks on a high-tech chain gang.”
Shortly after the SVTC report was released, Dell ended its relationship with Unicor. The nation’s leading computer manufacturer—which last year also faced protests in which environmental activists dressed up in chains and prison uniforms—insisted it broke with Unicor for business reasons, not because of the controversy. Last August, the state of California, which had been sending its obsolete electronics to Unicor’s Atwater facility, also ended that relationship.
Facing ‘Unfair’ Competition
From a private-sector perspective, electronics recyclers charge that Unicor enjoys numerous “unfair” competitive advantages, such as the low hourly wage it pays its inmate workers—from 23 cents to $1.15—and “mandatory sourcing” rules that require federal agencies and many state offices to use Unicor’s products and services. Though Unicor can and does waive the sourcing rules at times, recyclers argue that large quantities of obsolete government electronics often get set aside before private recyclers can even bid on the material.
In addition, the Pricewaterhouse-Coopers audit notes, Unicor shares facilities with the Federal Bureau of Prisons “generally at no cost” to Unicor and does not have to maintain insurance to cover property damage, product liability, or “other customary business loss exposures,” with some of those losses potentially absorbed by Unicor while others can be reimbursed by the Bureau of Prisons. Personal injury claims against Unicor “are paid directly by the federal government,” the audit notes.
As a wholly owned corporation of the federal government, Unicor is exempt from federal and state income taxes, gross receipt taxes, and property taxes. Unicor has also been able to borrow $20 million directly from the U.S. Treasury. Interest on the note is 5.5 percent, but interest only accrues under certain conditions. In fiscal years 2002 and 2003, for instance, Unicor paid no interest, reports PricewaterhouseCoopers.
One leading e-recycler adds that his firm, based on its size and location, must post an expensive bond with the state in case he were to go out of business and leave behind environmental problems. “I’ve got to put up $190,000 of my money for a bond and keep it there for as long as I’m in business,” he says. But Unicor, which operates a prison factory in the same state, “doesn’t have to put up one red penny.”
Though this recycler’s firm once worked with Unicor, he now sees prison labor as a threat to the e-recycling industry, second only to low-wage competition from China. In fact, his company recently raised the issue in talks over acquiring another recycler that still used prison labor (at a state prison operation, not Unicor). “If we’d bought them—which we didn’t—we told them in advance that they would have to shut down the prison labor work,” he explains. “That’s how strong we feel.”
He’s not alone. Numerous e-recyclers have voiced similar opposition. Some 27 e-recyclers have even signed “The Electronics Recycler’s Pledge of True Stewardship” from the Basel Action Network (BAN) (Seattle). This pledge, which also covers not exporting e-scrap to developing countries or sending it to landfills or incinerators, includes the promise: “We will not allow any E-waste we handle to be sent to prisons for recycling either directly or through intermediaries.”
View From the Bottom Line
Various electronics recyclers point to the office furniture business as an industry “almost decimated” by Unicor. During an April 2001 hearing before the Small Business Committee of the U.S. House of Representatives, for instance, numerous office furniture dealers across the country cited examples of losing contracts worth hundreds of thousands of dollars, slashing their staffs, and potentially shutting their doors because federal or state agencies to which they previously supplied products were now buying exclusively from Unicor.
One furniture dealer joked that the only way to compete with Unicor was to become a convicted felon yourself, while another suggested tragically that the man who murdered her father-in-law was now a prison laborer “taking away my livelihood.”
Bob Glavin, president and chairman of United Recycling Industries Inc. (Franklin Park, Ill.), is worried that a similar fate awaits e-recyclers, especially firms like United Recycling that actually process obsolete equipment. Unicor’s business practices let it offer “a pricing windfall to their customers,” which a private recycler simply can’t match, he notes.
“Let’s say you have a scrap dealer who collects monitors but doesn’t process them,” Glavin explains. “I, United Recycling, will charge him X to process those monitors, or he can send them to Unicor and get them done for X-minus. Where’s he going to go? He’s going to go to Unicor.”
What’s more, Unicor expects its recycling operations to more than double in terms of the number of prison factory sites, says one recycler, recounting a conversation he had with a Unicor official. Plus, prison factories have broadened their line of recycling services, adding toner cartridges as well.
Unicor’s expansion could keep private electronics recyclers from investing in their own businesses “because they’ll never know when Unicor’s going to be around the corner,” Glavin says. Moreover, new entrants could be harder to find. “People are less inclined to get into something where they’re always going to be at a competitive disadvantage,” he notes.
Glavin and other recyclers even question the long-term benefits of teaching inmates how to recycle electronics manually. Dismantling old computers “is not a growth industry, you’re not learning a career,” Glavin says. Inmates who get released after dismantling computers for Unicor aren’t likely to find jobs as computer demanufacturers, “not when I do 500 monitors an hour in a shredder,” Glavin explains.
Steve Skurnac, president of Noran-da Recycling, agrees that there’s not much demand for manual dismantling, at least not among the larger private e-recyclers. He urges Unicor to concentrate on teaching inmates more marketable skills, such as repairing electronic equipment.
Even an e-recycler who does rely on manual labor notes that it takes only about a week to train a completely inexperienced person how to dismantle old electronics. “We don’t need Unicor to train people for us,” the recycler says. He adds, however, that if Unicor provided its workers with specialized training—say, on how to identify which parts of a computer can be salvaged or what equipment is still good enough to upgrade—“then, yes, those people would be able to find a job in the industry.”
Noranda Recycling’s Skurnac also wants to see more information disclosed by Unicor about the volume of material it handles as well as its safety and environmental practices—especially in light of the open access to facilities that Noranda Recycling provides for potential customers and government regulators.
“Certainly, I have some sensitivity to the fact that Unicor works in federal prisons, and it might be tough to have visitors,” Skurnac says. “Nonetheless,
I think there’s a certain onus on anybody who’s operating in this business to have some transparency in what they’re doing. If they can’t provide that transparency, for whatever reason, then potential shippers should think twice about sending material there.”
Working With Inmates
Not all private recyclers are opposed to using Unicor, of course. As Bob Glavin observed, those who strictly collect electronic equipment often find Unicor’s processing fees attractive.
At the International Association of Electronics Recyclers (IAER) (Albany, N.Y.), for instance, the issue was debated last year and early this year, explains John Powers, a consultant to the trade group. “IAER represents a pretty broad cross-section of electronics recyclers,” he says. “Some actually did business with Unicor in partnerships, others might have been more neutral, and others had stronger feelings about it as direct competition.”
Indeed, some members even wanted Unicor to lose its status as an associate member of the organization. In the end, IAER decided not to take a formal position on Unicor, and Unicor was allowed to remain an associate member, Powers says. That decision, however, did prompt United Recycling—an IAER founding member—to leave the organization. The issue of prison labor and electronics recycling goes beyond Unicor, Powers adds. “Unicor was kind of the visible target ... because it’s a large organization with multiple facilities that was getting big contracts,” says Powers. “But these aren’t the only operations.” Others include state-based prisons throughout the country as well as private contractors that manage prisons for various levels of government.
The Prison Activist Resource Center Web site (www.prisonactivist.org/prison-labor), for example, lists some 40 state-run or state-contracted prison industry operations, though they don’t all necessarily offer electronics recycling. Utah Correctional Industries is one that does, working with NxtCycle Corp. (Mesa, Ariz.), reportedly to dismantle televisions and computers.
Unicor Responds
Despite the criticisms leveled against it, Unicor doesn’t seem defensive in making its own case. Electronics recycling “is an emerging new industry in the United States, and Unicor is proud of the fact that we have former program inmate participants that have been hired by the private sector upon their release to utilize the skills they acquired in Unicor to work in the electronics recycling industry,” says Larry Novicky, general manager of Unicor’s Recycling Business Group.
Novicky, however, provided no details on where any of those inmates are now working, nor on how many of them have found private-sector jobs.
In one sense, though, that’s not really the point. In a 1996 report, Factories with Fences, Steve Schwalb, Unicor’s chief operating officer, challenged the view that federal prisoners were not learning marketable skills. For many inmates, the work they do for Unicor is the first steady job they’ve ever held, he noted.
Thus, Unicor “teaches inmates the most marketable skill of all: how to work. No matter the job, successful employees must first possess a basic work ethic: dependability, reliability, the ability to work as a member of a team, the willingness to take direction from a supervisor, and pride in a job well done.”
Schwalb also countered the idea that Unicor has any competitive advantage, citing instead the many challenges the organization faces, from a requirement to employ as many inmates as possible in labor-intensive operations to the less-than-exemplary backgrounds and low productivity of those workers.
At the same time, inmates who participate in the strictly volunteer Unicor program require fewer correctional officers and present fewer problems for the penitentiary, thus reducing the cost of incarceration, Novicky says. Plus, after being released, Uni-cor’s former inmate employees are less likely to commit new crimes.
Novicky also stresses that Unicor receives no taxpayer funding to operate, that all revenue from its products or services goes back into the corporation as operating funds, and that a portion of the money earned by inmates is used to pay victim restitution, court-ordered fines, as well as family and child support. “Rather than draining the federal budget, these inmates contribute to a program that benefits not only the environment but also themselves and the taxpayers,” Novicky says.
In a written response to the SVTC report, Novicky noted: “Though we are not overseen by OSHA or the EPA, we are required to abide by their standards.” He also pointed out that the report did not mention “Unicor’s use of state-of-the-art respirators, hazmat suits, electronic drills, negative air filtration systems, or the HEPA filters and vacuums used at FPI Atwater.”
Novicky adds that “each of our facilities is staffed by a full time safety manager that ensures all environmental and OSHA regulations are strictly enforced.” Moreover, two Unicor recycling facilities—at the penitentiaries in Elkton, Ohio, and Marianna, Fla.—have been awarded the White House’s Closing the Circle Award for their electronics recycling activities.
Lawmakers Explore Lawbreakers’ Labor
The issue of prison labor caught Congress’s attention last year, though it wasn’t limited to electronics recycling. After several previous tries, the U.S. House of Representatives passed a measure aimed at eventually eliminating Unicor’s mandatory sourcing status and increasing the wages Unicor must pay its inmate laborers, first to half the U.S. minimum wage and eventually to the full minimum wage. The House measure—H.R. 1829—passed last November. A companion bill in the Senate—S. 346—was approved by a subcommittee last June, though it is unclear when or if it will be voted on by the full Senate.
Some see the proposed legislation as a step in the right direction; others are less impressed. “I’m not aware of too many private companies that are only paying minimum wage,” says Noranda Recycling’s Steve Skurnac. “So that might get [Unicor] closer to what it actually costs for private industry to do this, but I’m not really sure that’s the answer.”
Moreover, Unicor has at least five years to bring its wages up to that minimal level. “What happens in the interim?” asks another private recycler. “We continue to lose recyclers because they can’t be competitive with Unicor.”
SVTC also isn’t enamored with simply reforming Unicor. Though the group recognizes that a case can be made for prison labor in general, it would like to see Unicor get out of recycling electronics entirely. “It’s a violation of environmental justice concerns, and it also seriously undercuts the private-sector efforts,” says Sheila Davis, a coauthor of last year’s A Tale of Two Systems study.
On another legal front, at least one electronics recycler might sue Unicor over its procurement practices, though it’s unclear how successful that would be. A group of furniture manufacturers had sued Unicor over the alleged adverse impact on their industry, but this past April a federal circuit court ruled that the private manufacturers had not proved their claims of financial harm.
More Protests Ahead?
Though the issue of using prisoners to recycle electronics received considerable attention last year, some industry watchers feel the topic has cooled off since then. Both the pending legislation and the fact that these issues did get aired are cited as reasons. Another factor could be that SVTC—which pushed prison labor to the forefront with its well-publicized campaign against Dell—hasn’t been quite so active this year.
That could be changing soon, notes SVTC’s Sheila Davis, who says more Dell-style campaigns against specific companies using prison labor are being planned, perhaps by year’s end or early next year. She could not identify any targeted firms at presstime but stressed: “Just because the spotlight has been turned off doesn’t mean the issue isn’t there—the spotlight could be turned back on, hopefully within the next six months.”
For United Recycling’s Bob Glavin, a little more negative attention is just what the issue needs. Noting that both Dell and the state of California stopped doing business with Unicor after media attention focused on their use of prison labor, he says, “If people are doing it, it appears that they drop it as soon as the press hears about it.”
Unfortunately, Glavin adds, Unicor is getting into so many diverse industries, it can be hard to avoid doing business together. Recently, for instance, United Recycling ordered some shirts with its name on them. When the shirts arrived from a private manufacturer, the labels read: Made by Unicor. The shirtmaker had subcontracted its embroidery to a federal prison. Despite Glavin’s outspoken views about Unicor, “I ended up supporting them,” he notes ironically.
Unicor Recycling in Action
Unicor operates “recycling factories” at seven federal penitentiaries: Atwater, Calif.; Marianna, Fla.; Fort Dix, N.J.; Elkton, Ohio; Lewisburg, Pa.; La Tuna, Texas; and Texarkana, Texas.
These sites receive old electronics from a wide range of customers, including private industry, community collections, state agencies and governments, schools, county government, federal agencies, and the U.S. Department of Defense. Computer systems are sold to other companies. In addition, Unicor participates in the Computers-for-Schools program, where computers are donated to local schools. Commodities (metals, plastics, precious metals, and more) are sold to buyers or smelters who use the base products in recycling. Buyers are carefully screened to ensure that they don’t landfill any items.
Recyclable items are sent to a testing area to determine the appropriate production line. If, for example, a computer is reusable, it goes to the cleaning area where the case is cleaned, asset tags and owner identification tags are removed, and the hard drive is removed and placed in a secure area. The hard drive then moves to a “wipe” station—which doesn’t allow viewing of data—and erased in accordance with Department of Defense standards.
If an item is not reusable, it moves to the demanufacturing area where, again, cases are cleaned of asset tags and owner identification tags. The material is then broken down to individual commodities. Plastic is sorted and moved to the baling area. Wire and various metals are separated and placed in proper boxes for sale to a reprocessor.
Glass from cathode-ray tubes that can’t be reused is broken down for recycling. Plastic is removed, while the glass is broken into three sections and sorted for shipment to a glass processor.
If the supplier requires destruction, all asset tags and owner identification tags are first removed, then the equipment is sent directly to the dismantling area. The hard drives are removed, and a hole is punched through the drive.
Unicor has a no-landfill policy regarding the electronic equipment it receives. In addition, Unicor requires all reprocessors or buyers of products from prison recycling locations to certify in writing that they have a no-landfill policy and sign a certification and letter of assurance relating to the export/transfer of items to countries on the restricted list.
Source: Unicor.
Robert L. Reid is managing editor of Scrap.
Using prisoners to recycle old electronics is seen by supporters as a productive way to rehabilitate criminals. Others claim the practice is environmentally unsound and represents unfair competition. Here’s the latest on this controversial debate.