Many American companies are finding it hard to compete successfully because of what they see as unfair competition. This unfair competition is able to grab business from them partly because it is able to pay its workers much less than most American workers are paid. It's also exempt from paying taxes in the U.S. and doesn't have to adhere to many U.S. regulations.
It's true that there is competition like this that's based overseas, where labor is cheaper. But that's a topic for another time and place, because in this case, the competition in question is domestic. It's right here among us -- just behind those bars over there. For many American companies, the competition that's pinching their profits is coming from prison, and it sells its products and services to Uncle Sam.
Meet the government-run business called "Federal Prison Industries" (FPI), which also goes by the trade name UNICOR. It employs inmates in a wide range of activities, paying them no more than $1.35 per hour. It's under fire recently from some small-business owners in the form of a reform bill. The bill, which has been green-lighted by the House, is to be voted on by the Senate.
Inc. Magazine recently explained that the bill, "seeks to strip FPI of its ability to lock private companies out of federal contracts." Apparently, government agencies are required to buy goods and services from FPI -- unless FPI signs a waiver. The Inc. quotes the CEO of a chair manufacturer who has been denied by FPI every time she has applied for a waiver -- even though the chairs manufactured by her company are lower priced and higher quality.
A Grand Rapids, Mich., news station reported that furniture maker Herman Miller (NASDAQ:MLHR) and others have been struggling against UNICOR, with its 17 plants manned by 5,000 felons. The government apparently buys a billion dollars of office furniture per year, with UNICOR enjoying about a 25% market share.
If you're researching a company, perhaps check to see if it competes with UNICOR. Who knows -- perhaps some prisoners are writing software to compete with Microsoft (NASDAQ:MSFT) or brewing java confections to compete with Starbucks (NASDAQ:SBUX). OK, probably not. Still, if your investment candidate does compete with UNICOR, and UNICOR's advantages are decreased or removed, the company may enjoy a big boost.
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Longtime Fool contributor Selena Maranjian owns shares of Microsoft and has never worked while in prison.
