In Economic Consequences of the U.S. Convict Labor System, UCLA economist Michael Poyker uses data on prisons and their surrounding areas from 1850 to 1950 to examine the role that free/extremely low-waged forced convict labor had on wages.
Poyker concluded that forced labor slowed manufacturing wage growth by 16% and lowered labor-force participation by 20%; it also drove automation because the firms that couldn't use slave labor had to replace their workers with machines.
Globalisation means that convicts stitching Victoria's Secret bras compete as much with Chinese workers as with locals. But many make items, such as military uniforms, which by law still have to be made in America. As a result, Mr Poyker says, the crowding out of free labour by prisoners still occurs today. In 2012 Tennier Industries, an American military-clothing firm, fired 100 workers because it could not compete with rivals employing convicts.
How convict labour increased inequality [The Economist]
(via Naked Capitalism)