How Do Private Prisons Make Money?

How Do Private Prisons Make Money

The question “how do private prisons make money” might seem strange. But it is still a relevant question. However, a private or for-profit prison isn’t different from a public prison. The only thing is that the former is managed privately and focuses on making more profit. So, here goes the all-important question;

How are private prisons generating revenue? 

First, you need to understand that private prisons make money directly from the government. They also have legal statuses. They receive a certain amount “stipend” from the government, which covers the cost of housing or taking care of a specific number of inmates. For instance, the government might decide it is ready to pay $150 per inmate detained in a for-profit prison, per day. And the for-profit or private prison may end up not spending close to that figure for each inmate. Instead, they may decide to cut costs and spend just $90 per inmate each day, thus saving a whopping $60 per day for each person under their correctional facility. Multiply that figure for 1000 inmate held in a private prison, and you will see the vast amount these prisons are generating for their shareholders.

You can continue reading to get more information regarding this topic.

What’s A Private Prison?

The word “private” makes it look unique. But the truth is there’s nothing special about these prisons. The only reason they are popular and are being patronized by the government is that the government thinks they are less expensive. A private prison might claim to house an inmate for $150 per day, while a public prison’s cost for one inmate might be as high as $200.

Seeing this difference alone, the government would want to consider striking a deal with the private prison because it seems they will be saving a lot of money. Private prisons also claim to provide the same management and security as a public prison would. But despite their claims, in-depth investigations have proven otherwise.

Again, private prisons are not built by the government. Such projects are funded by private individuals, whose aim is to make more profit. And for an individual that invested his or her life savings in such projects, the ultimate focus would be profit. You cannot be expecting such a person to put the interest of the inmates first. Even if you were told that’s how they operate, you should understand it’s just a marketing strategy.

How Private Prisons Became Popular

Don’t be put off by the numbers of companies running private prisons. The key players might be few, but that hasn’t changed the fact that the industry has been making a huge profit for its shareholders. The industry started way back in 1984 and is now worth over $5 billion. You might be surprised at how private prison business grew so fast. But the question is who has been patronizing them?

The answer is simply the government, which has the money to spend. The for-profit prison business started at the state level. And the first-ever private prison in the United States’ soil started in Tennessee in the year 1984. The first-ever company to run such business was the “Corrections Corporations of America,” which is now called CoreCivic – what a cute name!

The fight against drug abuse took a new dimension. It was like an all-out war between law enforcement agencies and the masses, particularly those suspected to be doing drugs. More and more individuals were arrested and kept in government facilities (public prison). But it got to a point where the population was growing so fast that the facilities could no longer accommodate more prisoners.

All these gave rise to the private prisons established in the United States of America, but there’s more to it. A federal judge made a decree to stop Tennessee from accepting more inmates because of overcrowding. The judge’s intentions to stop the admittance of more prisoners where in order, but the prisoners needed to be housed anyway.

So, there were opportunities, and with private companies lurking around, it was easy for them to seize those opportunities to make wealth for themselves. These private companies made claims that they could provide the needed security, management, and match the public prison standards. Hence they should be given a chance to operate. They also proved that they could run private prisons effectively with a few numbers of staff and save the government some money.

Their appeal sounded pleasant. And today, approximately 9% of the entire United States’ prisoners and 19% of the whole federal prisoners are housed in privately owned prisons. In short, you will also find over 75% of the entire immigrants whom the ICE detained in these for-profit prisons.

What are the companies dominating the for-profit prison industry?  When issues regarding private prisons pop up in the news, the two names that usually come out of the lips of reporters are CoreCivic and GEO Group. These two establishments have transformed the industry, and there are claims that the GEO Group contributed massively to President Trump’s campaign. Both companies also dipped their hands in their pockets during the president’s inauguration into office.

Here’s the figure that shows how dominant these two for-profit prison companies have been over the years. 42% of the market belongs to CoreCivic, while the GEO group handles 37%. So, these two companies call the shots as far as private or for-profit prison is concerned.

The Good And Bad Of Private Prisons 

People have had different views about private prisons since their inception and popularity. While some believe they are a wise choice, others have had contrary views. So, to put this issue to rest, we will take a close look at the pros and cons of for-profit prisons. Call it the good and the bad if you like; they are still the same thing.

So, What’s Good About Private Prisons?

Here’s what you need to know:

Cheaper option for taxpayers

The government has several financial obligations to fulfil. So, any opportunity to cut down costs is embraced with open arms. Private prisons seem to be a much cheaper option for the government. The reason is that they can act swiftly to search for and embrace best practices without blowing their budget. The management can implement cost-saving measures quickly.

Benefits the local community economically

It’s when people are gainfully employed and busy for most of the day that they might turn a blind eye to crime. So, any opportunity to provide jobs for people in a community is a welcome development. Private prisons can positively impact their host communities economically. In addition to hiring workers, they tend to patronize businesses within the community. They aim to make more money, so you can’t find them traveling a thousand miles to get supplies for the prison. They have to rely on their host communities for most of the items they need.

Private prisons are better at maintaining prison population

Most public jails are easily overcrowded, and this makes them difficult to manage. Inmates in those prisons could face unhealthy and inhumane conditions, which isn’t proper. For instance, at a time, the operational capacity of the public prison system in California was 137.5 percent. That was the case until the Supreme Court ordered the state to reduce the population. However, such may likely not happen in a private prison because they have a reputation to protect. So, subjecting inmates to inhumane conditions would create a bad image and even drive them out of business. But that’s not the case. These prisons have better population control and can transport prisoners to any location whenever the need arises.

Decisions are made and implemented faster

In a public prison, decisions are never made and implemented overnight. They have to pass through several offices and take quite some time before implementation begins. It could take over four years for the implementation of a single policy change in a public prison. The house needs to debate it, and after giving the nod, the president or whoever is at the helm of affairs needs to sign the bill into law. But things are different in private prisons. Their management structure allows for quick decisions to be made and implemented.

What’s Bad About Private Prisons?

Well, here’s what you need to know about the bad or cons of private prisons.

They are not safe for inmates and correctional officers

In private prisons, violence is on the high side. Inmates face several attacks from their fellow inmates, likewise correctional officers. Plus, they have a low ratio of officers to inmates and often rely on prisoners to protect themselves. Their focus is to lower the cost of operation and make more profits. So, it’s not common to find a large number of employees or correctional officers in such facilities.

May lobby officers and influence legislators 

For the for-profit prison, anything to make more money is welcome. So, there’s a chance that they might lobby in some instances. The longer inmates are housed in their facilities, the more money they are going to make. So, there is a high chance that they might influence most officers to issue more charges to offenders so that they can receive longer sentences.


How private prisons make money is a relevant question. But the most important thing the government needs to pay attention to is the welfare of inmates. The for-profit or private prisons are out there for the monetary gains. That’s their primary goal. So, there’s a high possibility that the safety of inmates might not be a primary concern. However, the scales have started falling off the eyes of most states. They are now paying attention to what most critics have been saying against for-profit prison businesses.

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