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Prison Towns: When the Economy Depends on Incarceration

Published on March 27, 2025, by InmateAid

Table of Contents

 

Introduction

In many parts of America, incarceration is not just a policy—it’s an industry. While prison reform debates often focus on justice, rehabilitation, and civil rights, there’s another powerful force at play: economics. Across the country, small towns and rural counties have come to depend on prisons as critical sources of employment, revenue, and identity. These “prison towns” have built their futures around the incarcerated—and in doing so, have created a quiet dependency that raises difficult questions about the intersection of punishment and profit.

How Prisons Became Economic Anchors

In the 1980s and ’90s, as mass incarceration exploded across the United States, many rural communities were struggling with collapsing industries—factories closed, farms failed, and coal mines dried up. In the midst of this economic despair, state and federal governments began building new correctional facilities to house the surging prison population. For many small towns, welcoming a prison became a lifeline.

New prison construction meant new jobs: correctional officers, maintenance staff, nurses, food service workers, and more. State and private prison operators promised reliable employment and a stable government presence in areas long abandoned by other industries. Local leaders, desperate for development, often courted prison proposals the way cities woo tech companies today.

Employment and the Incarceration Economy

In many prison towns, the correctional facility is the largest employer. A 2021 report by the Prison Policy Initiative found that in counties like Lassen (California), Hudspeth (Texas), and Johnson (Arkansas), prisons account for more than 20% of local employment. These jobs often offer stable pay and benefits in communities where few alternatives exist.

But there’s a catch: the economic benefit is tightly tethered to inmate headcounts. When prison populations decline—whether due to reforms, falling crime rates, or court orders—communities feel the impact. A shrinking inmate population can mean layoffs, reduced state funding, and fewer support contracts for local businesses. In some cases, towns have lobbied against decarceration efforts out of fear for their local economies.

Counting Inmates as Residents: A Hidden Advantage

Another lesser-known aspect of the prison economy is how inmates are counted. During the U.S. Census, incarcerated individuals are typically counted as residents of the prison location, not their home communities. This practice, known as “prison gerrymandering,” inflates the population numbers—and political clout—of prison-hosting districts.

For prison towns, this boosts access to federal and state funding tied to population metrics, such as grants for schools, infrastructure, and emergency services. For inmates’ home districts—often urban and disproportionately Black or Latino—the result is a loss of political representation and resources.

Private Prisons and the Corporate Incentive to Incarcerate

In some towns, the prison isn't publicly run but operated by a private company under a government contract. These for-profit prisons introduce an even more complex layer to the incarceration economy. Corporations like CoreCivic and GEO Group often position themselves as economic engines for rural America, promising hundreds of jobs and millions in local spending.

But critics argue that these incentives encourage incarceration for the sake of profit. Private prisons are incentivized to keep beds full and lobby against reforms that reduce incarceration rates. When contracts are tied to occupancy minimums—such as guaranteeing 90% bed usage—governments can be forced to pay for empty beds or slow down release efforts to avoid financial penalties.

What Happens When the Prison Closes?

The risks of economic dependency become stark when a prison shuts down. Entire communities can be thrown into economic crisis. Schools lose enrollment. Grocery stores and gas stations close. Property values fall. Local governments lose tax revenue, and laid-off workers are left scrambling in areas with few alternative industries.

In 2024, the federal Bureau of Prisons announced plans to close several prison camps, including facilities in Pensacola, Duluth, and Morgantown. While the closures were aimed at addressing staffing shortages and outdated infrastructure, they also sent shockwaves through the towns that hosted them, where many residents had worked at the facilities for decades.

A Moral Dilemma: Growth Through Incarceration

At the heart of the prison town model is a deeply uncomfortable question: Should communities prosper through the incarceration of others? For some towns, the answer is practical—residents need jobs, and the prison provides them. But for reform advocates, it’s a troubling dynamic: a system where economic stability depends on keeping people behind bars.

This dependence can quietly erode political will for decarceration. Even well-meaning reforms—such as bail reform, sentence reduction, or drug decriminalization—can be met with local resistance in places where prison beds equal paychecks.

Frequently Asked Questions About Prison Towns and the Incarceration Economy

1. What is a prison town?
A prison town is a city or rural community whose local economy heavily relies on the presence of a correctional facility. In many cases, the prison is the largest employer in the area and contributes significantly to local revenue through jobs, services, and federal funding.

2. Why do some towns want prisons built in their community?
Towns struggling with unemployment or economic decline often view prisons as a source of stable government jobs and infrastructure investment. Local leaders may actively court prison construction to replace lost industries like farming, manufacturing, or mining.

3. How many people are employed by prisons in small towns?
In some rural counties, prisons account for over 20% of total employment. Correctional officers, healthcare workers, administrative staff, and vendors who support prison operations all contribute to this job market. Source: Prison Policy Initiative

4. What happens to a town when a prison closes?
Prison closures can lead to economic collapse in towns that are overly reliant on incarceration. Residents lose jobs, property values drop, local businesses shut down, and municipalities face budget shortfalls due to declining tax revenue and population.

5. What is “prison gerrymandering”?
Prison gerrymandering is the practice of counting incarcerated individuals as residents of the prison location for the U.S. Census, instead of their home communities. This inflates political representation and funding for prison-hosting areas. Learn more at Prisoners of the Census.

6. Is the prison industry privatized in some areas?
Yes. Some towns host private prisons operated by companies like CoreCivic or GEO Group under government contracts. These for-profit institutions promise economic benefits but are often criticized for incentivizing mass incarceration and cutting corners on inmate care.

7. Do prison towns oppose criminal justice reform?
While not always explicit, prison towns may resist reforms that reduce incarceration rates—such as bail reform or shorter sentences—due to fears of economic loss tied to declining inmate populations.

8. How are inmates counted during the U.S. Census?
Inmates are counted as residents of the location where they are incarcerated, not where they lived before arrest. This affects federal funding and legislative representation. Some states are beginning to reform this practice.

9. What are alternatives to prison-based economies?
Towns can diversify their economies through industries like renewable energy, agriculture, remote work hubs, tourism, or education-based development. However, transitioning away from prison dependence requires long-term planning and state-level support.

10. Are there efforts to reduce prison dependency in rural communities?
Yes. Reform groups and economic development coalitions are working to help towns invest in sustainable alternatives. But the shift is slow, and many rural communities still rely on prisons as economic anchors. The Vera Institute of Justice is one organization supporting such transitions.

Looking Ahead: Diversification or Dependency?

Some prison towns are attempting to diversify their economies, investing in clean energy, manufacturing, or remote work hubs. Others remain committed to the prison as an anchor institution. As prison populations slowly decline across the U.S., policymakers will be forced to reckon with the economic fallout of shrinking incarceration rates, especially in towns that built their identities—and budgets—around incarceration.

The future of these towns depends not only on smart economic planning but on a broader cultural shift: one that sees justice reform not as a threat to livelihoods, but as a necessary step toward a healthier, more equitable society.