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BOSTON PUBLIC LIBRARY 



3 9999 06317 366 8 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 



DIVISION OF REVIEW 



THE PRISON LABOR PROBLEM UNDER NRA ADMINISTRATION 
AND THE PRISON COMPACT 



By 
Vernon J. Clarke 



WORK MATERIALS NO. 40 



N.R.A. ORGANIZATION STUDIES SECTION 
February, 1936 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 
DIVISION OF REVIEW 



THE PRISON LABOR PROBLEM UNDER NRA ADMINISTRATION 
AND THE PRISON COMPACT 



By 
Vernon J. Clarke 



N.R.A. ORGANIZATION STUDIES SECTION 
February, 1936 



9742 



7 R E U R E 



This study of "The Prison Labor Problem under N.R.A. Administration 
and the Prison Compact" was prepared "by Fr. Vernon J. Clarke of the NRA. 
Organization Studies Section, Mr. " "illian "\ Bardsley in charge. 

The study treats the experience of the National Recovery Administration 
with the problem, as brought before it by proposed code -provisions, of the 
competition of prison made goods ^ith the products of nrivate industry. 
The detailed consideration given the subject is indicated by the Table of 
Contents and by the Summary immediately following the Table of Contents, 
which briefly sets forth the more important aspects of the N.R.A. exper- 
ience, as found in succeeding chapters of the study. While this Summary 
contains some of the author's conclusions, the author's evaluation of 
the effect of NRA activities in dealing with the problem and his conclu- 
sions will be found in Chapter IX. 

The primary purpose of mimeographing the study is that of making 
available to students of the subject and to administrative officials the 
exoerience of NBA. Accordingly, the documentation is rather full and 
detailed. It will'-, be observed that the opinions stated and the recom- 
mendations made are exnressive of the point of vie 1- of the author and are 
not to be regarded as official utterances. Thefre opinions and recommenda- 
tions are further material for examination and study. 

At the back of this report vill be found a brief statement of the 
studies undertaken by the Division of Review. 



L. C. Marshall, Director 
Division of Review 



-l- 



9742 



TABLE OF CONTENTS 

PAGE 

SUMMARY VI 

CHAPTER I . The Problem 1 

I . Free Industry Viewpoint 1 

II . Frison Executives Viewpont 2 

III . Benefits to Frisoners 3 

IV. Fublic Viewpoint 3 

V. Relationship to N.R.A 4 

CHAPTER 1 1 . The Compact 8 

I. Origin 8 

II. Objectives 12 

III. Formulation 13 

IV. Presidential Approval 16 

CHAPTER III . The Prison Labor Authority 17 

I . Conferences with Cotton Garment Code 

Authori ty 17 

II . Conferences with Twine and Cordage 

Code Authority 20 

III. Election of Formal Frison Labor Authority 23 

IV. Efforts of Prison Labor Authority on 

Allocation and Diversification 24 

V. Prison Labor Authority Requirement of 

Labels on all Frison Goods in Compe- 
tition with Free Industry Goods 

Requiring Labels 24 

VI. Action of Frison Labor Authority Estab- 
lishing Price Policy Under Article V, 
Sections (a) and (b) and Article VII, 

Section 2 (d) of the Compact 24 

VII. Action of Frison Labor Authority on 

Assessments 25 

VIII. Prison Labor Authority Vote to Bring 
Jails and Houses of Correction of 
Minor Folitical Subdivisions Who 
Become Signatory to Compact Under 

Their Jurisdiction 26 

IX. The Association of States Signatory 
To the Compact Vote to Continue 
The Prison Labor Authority After 
The Supreme Court Decision in 

Schechter Case 26 

CHAPTER IV. Labels and Insignia 27 

I. Application For Use of N.R.A. Labels 

By the Frison Labor Authority 27 

II . Legal Division Memorandum Stating The 
Administration May Authorize the 
Use of N.R.A. Labels on Prison Made 

Goods 30 

III. Memorandum of Acting Division Admin- 
istrator To Administrative Officer 
Recommending N.R.A. Labels be 
Authorized for Use on Frison Made 
Goods 31 

9742 -ii~ 



PAGE 

IV. Memorandum of Folic;/ Advisers On 

Question of Whether Goods Manu- 
factured Under the Compact Should 

Bear N.H.A. Late Is 31 

V. Folicy Decision Ruling that Prison 
Manufactured Products Under The 

Compact May Bear An N.H.A. Label 33 

VI. Administrative Order No. V-2 Setting 
Forth Regulations Governing The 

Use of N.H.A. Identification Symbols 33 

VII. Administrative Order No. V-3 34 

VIII. Budget and Audit Of Frison Labor Authority 35 

CHAFTEH V. Compliance 42 

I. Form Containing Instructions to Complainants 42 

II. Authorization of Frison Labor Authority 
To Hear and Adjust Complaints Under 

Article VII, Section 2(h) of the Compact 43 

III. Certificates of Compliance and Application 

For N.H.A. Labels 43 

IV. Code Authority Field Letter No. 5 45 

V. Complaints 48 

VI . Compliance Division Complaints 51 

VII . Nature of Complaints 52 

VIII. Industries Most Active in Entering Complaints 

Against Prison Made Goods 52 

IX. Other Industries Affected by Prison 

Competition 52 

CHAFTEH VI . Ulman Committee Report 53 

I . 36-Hour Week for Cotton Garment Industry 53 

II. Executive Order No. 118-135, October 12, 1934 54 

III. Points Concerning Prison Labor Covered 

By The Investigating Committee 54 

IV. List of Fersons Appearing 3efore Ulman 

Committee Representing Industry, Organized 
Labor, Frison Administrators and N.H.A. 

Officials 55 

V. Committee Report-N.R.A. Release No. 9029-A 57 

VI . Transcript of Hearing 61 

VII. Findings of Ulman Committee 62 

VIII . Recommendations of the Ulman Committee 62 

IX. N.H.A. Public Release No . 9078 64 

X. Definite Action of National Industrial 
Recovery Board on Ulman Committee 

Report, December 3, 1934 64 

XI. Comments of Prison Labor Authority On 

Ulman Committee Report 65 

XII. Prison Labor Authority Froposal to Effect- 
uate Recommendations of Ulman Committee 70 

XIII. Action of N.I.R.3., May 27, 1935, 

Accepting In Frinciple Frogram To 

Replan and Reorganize Prison Industries 74 



9742 -in- 



PAGE 

CHAPTER VII. Prison Industries Reorganization 

Administration 76 

I. Memorandum of May 18, 1935, From Acting 
Division Administrator Collins To 
L. C. Marshall Urging That Definite 
Action Be Taken By National Indus- 
trial Recovery Board to Further Prison 

Frogram Recommended by Ulman Committee 76 

II. Report of Organization Meeting Confer- 
ence of Free Industries On Economic 

Plan For Frison Made Goods 77 

III. Memorandum of Acting Division Administrator 
Collins To L. C. Marshall, Executive 
Secretary of the National Industrial 
Recovery Board, May 29, 1935, Outlining 
Steps to be Taken in Connection With 
National Industrial Recovery Board 

Action in Frison Labor Field 81 

IV. Proposed Executive Order Establishing 
Prison Industries Reorganization 

Administration 83 

V. Memorandum of Acting Division Administrator 
Collins to the Administrator of the 
National Recovery Administration Urging 
That He Present the Frison Labor 

Frogram to The President 84 

VI. Conference of N.P..A. Executives On Frison 

Labor Question , July 1 , 1935 85 

VII. Memorandum of Division Administrator 

Collins to Frentiss Coonley, Director, 

Division of Business Cooperation 87 

VIII. Executive Order 7194 Establishing Prison 

Industries Reorganization Administration 87 

CHAPTER VIII. Administration of Prison Labor Compact 89 

I. N.R.A. Personnel 89 

II . Frison Labor Authority Personnel 89 

III. Efforts of N.R.A. Officials to Coordinate 
Objectives of the Compact with Frison 
Labor Authority and Affected Code 

Authorities 90 

IV. Legal Aspects of the Compact 93 

V. Interpretations 98 

VI . Stays 100 

VII. Frison Industries Statistics as Compiled 

By N.R.A 101 

VIII. Frotests Received By the N.R.A. Against 
The Use of Frison Labor on Products 

To Be Sold in the Opan Market 101 

IX. Cooperation by Other Governmental Depart- 
ments and National Associations with 
N.R.A. in Administering the Compact 102 



9742 -iv- 



FAGE 

CHAFTER IX. Effect and Conclusions 103 

I . Stabilization of Frice Structure 103 

II. Encourage Uniform Frison Operations In 

Manufacturing and Selling 103 

III. Diversification Spreads Work Among Prisoners 

and Expedites Later Rehabilitation 104 

IV. Future Legislation 104 

V. State Use System 104 

VI. Legal Requirements in Disposing of Prison 

Made Goods 105 

AFFENDICES 107 

Appendix A Instructions to Complainants Against 

Unfair Prison Competition 107 

Appendix B Industries Affecting Frison Production 110 

Appendix C NRA Release No . 8314 114 

Appendix D NRA Release No . 9029-A 119 

Appendix E NRA Release No . 9029 142 

Appendix F NRA Release No . 9078 145 

Appendix G- Comments of the Prison Labor Authority 

on the Report of the Ulman Committee 146 

Appendix H A Flan Whereby the Federal Government 

May Assist the Several States to 

Abolish Unfair Competition in Frison 

Industries 158 

Appendix I Memorandum of July 23, 1935 from 

Prentiss Coonley to L. C. Marshall 160 

Appendix J Executive Order No. 7194 165 

Appendix Y Memorandum of Peter Seitz Re: Frison 

Compact 167 

Appendix L Information Regarding Summer s-Ashurst 

Act 175 

Appendix M States Complying with Certain Parts of 

Hawes-Cooper Act 178 



9742 



_v~ 



SUMMARY 

While most free industries of the United States were operating under 
Codes of Fair Coranetition approved under the National Industrial Recovery- 
Act, the Compact of Fair Competition for the Prison Industries of the 
United States of America offered the most satisfactory means of placing 
■orison made goods on the open market on a fair conroetitive basis with goods 
of free industries. For the first time in the history of this countr" free 
industry witnessed the sale of prison made goods on the open market under 
a voluntary agreement promulgated by the prison executives of the states. 
The purpose of this agreement was to maintain standards and price policies 
comparable to those of free industry. 

After a study of free industry and the view points of prison execu- 
tives and of benefits to the prisoners with respect to the subject of com- 
petition between prison goods and free industry goods, it was found that 
these groups were continually endeavoring to accomplish their objectives 
by pronounding their theories and ideas to governors, legislatures and 
prison executives. 

The relationship of the -problem of orison goods versus free industry 
goods developed r- hen an attempt was made by sponsors of the Codes for the 
Cotton Garment Manufacturing Industry, the Retail Trade, the Twine and 
Cordage Manufacturing Industry, the Farm Equipment Manufacturing Industry 
and others, to insert restrictive clauses into their respective codes 
which would do indirectly that which might not be accomplished directly, 
the objective being to prohibit members of these industries from handling 
or selling orison made oroducts. 

The Prison Executives of the states and representatives of the 
Bureau of Federal Prisons proposed a Code of Fair Conroetition to the 
President embodying the general principles contained in the Prison Comoact, 
but it was determined by the Legal Division that the Prison groups were 
not entitled to a Code because they could not comply ™ith Section 7(a) 
of the National Industrial Recovery Act. 

Certain provisions were inserted in the Cotton Garment Industry and 
the Retail Trade Codes which in effect prohibited members of that industry 
or trade from dealing in nrison made goods unless such goods were manu- 
factured under the terms of a prison compact and these provisions were 
stayed until such time as a Compact could be formulated by the states 
engaged in the production and sale of orison made goods on the open market. 

The Compact as formulated by prison executives and sponsored by 
the Association of States Signatory thereto secured the supoort of the 
Administrator on December 9, 1933, and was aooroved by the President on 
Aoril 19, 1934. 

Conferences were held between the Prison Labor Authority and Code 
Authorities of various industries esoecially the Cotton Garment and the 
Twine and Cordage Code Authorities, with respect to agreements as to dif- 
ferentials, mark-ups, charges for labor and overhead, and quantity dis- 
counts on products produced within the prisons. 

-vi- 



Efforts were made by the Prison Labor Authority to prohibit the 
expansion of prison industries whose -products entered the -public markets. 

The Prison Labor Authority voted that assessments made by that 
authority should conform to the assessments made under codes for correspond- 
ing industries. 

Mr. James V. Bennett, Secretary-Treasurer of the Association of 
States Signatory to the Compact made formal application for the issuance 
of an N.B.A. label for use on cotton garments manufactured under the terms 
of the Compact. 

On April 21, 1934, in response to !*r. Bennett's letter of application 
for the use of labels the Legal Division clarified the question of the 
Administrator's power to authorize the use of these labels on prison made 
goods. 

On April 27, 1934, the Administrative Officer of N.E.A. issued 
Policy Decision No. 6, which ruled that products manufactured under the 
provisions of the Compact may bear the NEA insignia and further specified 
what the design of the label should be. 

Administrative Order V-2 was then issued authorizing and empowering 
the Prison Labor Authority to issue NEA labels. The Cotton Garment Code 
Authority entered serious objections to the use of any HEA insignia on 
Frison made goods and requested that a stay of Administrative Order be 
issued pending a public hearing on this question. As a result of this 
application for stay a oublic hearing was held on Administrative Order 
V-2 which resulted in the issuance of Administrative Order V-3 June 12, 
1934. Administrative Order V-3 modified Administrative Order V-2 and the 
regulations approved by that order and it also denied the application for 
a permanent stay of Administrative Order V-2 as applied for by the Cotton 
Garment Code Authority. 

The Compact being recognized as a voluntary agreement, the Assistant 
to the Administrative Officer, in a letter of Anril 9, 1935, to the 
Economic Advisor of the Prison Labor Authority gave his tentative approval 
of the budget as submitted by that Authority in conformity with the re- 
quirements of Executive Order 6859 and in compliance with Administrative 
Order X-136. 

In order that all Code Authorities and other interested in securing 
compliance with the provisions of the Prison Labor Compact might be in- 
structed as to the procedure to be followed in filing complaints, the NEA 
sent out forms containing instructions to complainants and Code Authority 
Field Letter No. 5, of May 26, 1934, for information and guidance. 

Complaints concerning alleged violations of the Compact provisions 
were in most cases settled by the Prison Labor Authority. When the 
complaints were of such a nature that the Authority could not adjust them 
satisfactorily to parties involved, they were referred to the Public 
Agencies Division of the N.E.A. , where efforts were made to adjust them 
in a fair and impartial manner. The case of the application of the 
Huffine Shirt Company for prison labels, which labels were to be used on 

-vii- 

9742 



products manufactured by inmates of the Kentucky State Penitentiary was 
denied after a public, hearing held by the Prison Labor Authority on 
the grounds that the proposed contract which the Huffine Shirt Company 
was to enter into with the State of Kentucky was illegal because it lack- 
ed any specific element of consideration. 

On August 21, 1934, by Executive Order 6828, Amendment No. 7 to the 
Code for the Cotton Garment Industry was approved. This Order imposed 
a thirty-six hour work week and a proportionate increase in pay of em- 
ployees, so as to maintain the same weekly wage rate as was -provided in 
the approved Code for this Industry, 

The Prison Labor Authority then advised all -orisons manufacturing 
cotton garments that in accordance with Article II of the Compact, they 
must not operate cotton garment industries in excess of thirty-six hours 
per week. Apparently this did not satisfy the Cotton Garment Industry as 
they continued to complain about the burden imposed upon them by prison 
ind.ustries. This resulted in the appointment of the Kotchkiss Committee 
to make investigations as to whether or not the Cotton Garment Industry 
could operate under the thirty-six hour work week provision. This Com- 
mittee recommended that the President appoint another Committee to mate 
a definite study of the competition of products of the Cotton Garment 
Industry with -oroducts of orison labor. 

In accordance therewith, the President on October 12, 1934, appoint- 
ed the Ulman Committee, conroosed of Judge Joseph N. Illman, as Chairman, 
Prank Tannenbaum and W. Jett Lauck. I.'r. Lauck was a member of the 
Hotchkiss Committee. The sum ar.d substance of the recommend-itions of the 
Ulman Committee were that fifty million dollars be set aside for the pur- 
pose of helping the states to replan and reorganize their prison in- 
dustries, remove -orison made goods from the open market and bring to an 
end the prison labor controversy which has burdened American industrial 
and political life for over s. century. It was further recommended that 
the Federal Emergency Relief Administration purchase and use such prison 
made garments as were then being mde in prisons and immediately relieve 
the open market of this competition. Several conferences were held with 
the FERA officials and it was tentatively agreed that such a program 
could be developed as far as that end of the program was concerned. 

Nevertheless, the prison group answered the recommendations of 
the Ulman Committee, urging, first, that adequate state use laws be 
made compulsory before any relief or aid be granted to the respective 
States and that a corporation be set up to make an adequate survey of 
needs of the respective States before any permanent program be under- 
taken and that in the meantime it be a condition precedent to the granting 
of Federal aid that limitations be set for the sale of products on the open 
market by prisons a.nd th^t a program be worked out through the F.E.R.A. , 
using unemployed labor and preventing idleness in the penitentiaries. 

On Hay 27, 1935, the National Industrial Recovery Board adopted 
a plan regarding the competition of prison made products with products 



-Vlll- 



of private industry. This plan is set forth in Chapter VI, Section XIII, 
Pages .... ' and ?.!.-' . 

Executive Order 7194, Appendix "Q,", established the Prison Industries 
Reorganization Administration. The governing "body of this Agency consisted 
of a board of five appointed by the President to hold office at his plea- 
sure. The stablishraent of the Prison Industries Reorganization Board ter- 
minated official action of the National Recovery Administration with re- 
spect to the Prison Labor problem and thereafter the Prison Industries 
Reorganization Administration was na.de responsible for carrying forward the 
constructive attack on the problem originated under the National Recovery 
Administration. 

A minor problem which NRA officials encountered in seeking to obtain 
compliance with the terms of the Prison Compact was that of arriving at 
satisfactory voluntary agreements between prison manufacturers and free 
industry manufacturers with respect to establishing charges for labor and 
overhead in an effort to arrive at prices for which prison goods could be 
sold and conform to the provisons of Article V of the Compact. Continual 
effort: was made by NRA officials to arrive at fair decisions with respect 
to various questions presented. 

The Prison Labor Authority was unable to accomplish a great deal with 
respect to diversification of Prison Industries as provided for under 
Article VII, Section 2 (f) (l) of the Compact. However, it was able to 
reduce the production of prison made products in some instances. 

During the formulative period of the Compact in the Pall of 1933, 
those who assisted in drafting the Compact provisions rind those who signed 
it as officials of their respective states did not considerthe formal legal 
aspects of this working agreement. The purely legal phases of the instru- 
ment were not given very serious consideration as it was recognized that 
each institution was regulated by the statutes of its respective state and 
the Compact was entered into voluntarily with the spirit of cooperation in 
an endeavor to effectuate the policies of Title I of the national Industrial 
Recovery Act. 

The Compact was implemented by a clause in the Retail Code which pro- 
hibited the sale on the open market of prison-made goods not made under its 
terms. The Compact lacked legal validity as set forth in a memorandum of 
December 1, 1934, by the Legal Division. The contentions of this memorandum 
are largely substantiated by Appendix "H" and NRA Legal Research Bulletin 
No. 864. 

On December 28, 1934, an interpretation was rendered to the effect 
that free labor employed by contractors operating in state prisons were sub- 
ject to the jurisdiction of the Prison Labor Authority insofar as working 
conditions were concerned. However, this free labor was to conform to 
the wages, hours and general labor provisions of the corresponding free 
industry code. Again on April 11, 1935, another important interpretation 
was rendered concerning certain prison contractors who were engaged in the 
manufacturing of cotton garments. The question involved the jurisdiction 
of the Cotton Garment Code Authority and the Prison Labor Authority. 

-ix- 



A decision was rendered that such contractors should be under the juris- 
diction of the Prison Labor Authority. 

The Prison Compact did curte.il to some degree the burdening of the 
public market with prison goods and the efforts mode by the prisons to 
comply with their Compact diminished the dumping of prison goods on the 
market at lower than fair current prices. 

As a result of conferences and agreements between the Prison Labor 
Authority and free industry code authorities uniform sales policies with 
respect to quantity discounts and percentage of markup worked out fairly 
successfully. It was found that diversification of industry in penal 
institutions spread work among the inmates and offered training in the 
performance of varied tasks which were beneficial to them when they again 
join the ranks of free society. 

The writer believes that Federal legislation should be enacted which 
would encourage the States to e'ter into a Prison Compact to which the 
States may subscribe through approval by their respective legislatures. 
The objectives and purposes of the Compact would be (a) to maintain fair 
competition between products of private domestic industry and those of 
prison industry; (b) to assure a diversification of the output of prison 
industries in fair proportion to the production of affected free indus- 
tries; (c) to relieve unemployment within the penal institutions of the 
States by providing work for the inmates of a rehabilitative a^d chara- 
cter-building nature and les?en the dangers inherent in idleness. 

In theory the exclusive State-use system of regulating prison in- 
dustries sounds simple, but in enforcement and practical application it 
has many defects. TJhere the exclusive State-Use System is in effect free 
industry is deprived of its proportionate share of business from govern- 
mental institutions. On the other hand the State-Use System does eli- 
minate prison made goods from the free industry market. Furthermore it 
may be contended that the State-Use System, especially where tied up 
with a program of diversification of products, is more readily adaptable 
by the larger states. If the exclusive State-Use System is ever put into 
effect on a broad scale, the prisons must be guaranteed the exclusive 
market by the States and their political subdivisions, for all prison 
products. 

The Prison Industry problem is essential 1 y a state affair. However, 
the Federal Government can be of assistance through advising and aiding 
the States in formulating a diversified prison program, but it should not 
attempt to force any program upon the States which they do not wish to 
voluntarily accept. 

The legal aspects regarding the disposition of prison made goods 
varies in different States. Many States have enacted regulatory statutes 
for the purpose of identifying and controlling the shipment of such goods 
within their borders. Congress likewise has enacted such legislation as 
the Sumner- As hurst Bill, the Hawes-Cooper Act, which have important bear- 
ing on this question. 

-x- 



CHAPTER I 

THE PROBLEM 

This report is an effort to review the experiences of industry, 
prison executives a n d the National Recovery Administration in 
developing and administering a workable program for the disposition of 
the products of penal, reformatory or correctional institutions 
manufactured, produced or mined in competition with similar products of 
free industry. For more th ? -n a century recognized authorities have "been 
confronted with this problem and many proposals have be?n made — some 
through legislative measures, both national and state, and others 
through voluntary agreements. None of these appear to have accomplished 
the desired end — to the extent that all parties interested are 
satisfied. However, during the period that most of the free industries 
of the United States were conducting their affairs under codes of 
fair competition approved under Section 3 (a) of the National In- 
dustrial Recovery Act, it is recognized that the Compact of Fair 
Competition for the Prison Industries of America offered the most 
satisfactory means of placing prison-made goods on a fair competitive 
"basis with goods of free industry. 

I. FREE INDUSTRY VIEWPOINT. 

Under the Compact of Fair Competition for the Prison Industries 
of the United States of America (hereafter referred to as the Compact), 
free industry for the first time in the history of this country 
witnessed the sale of prison-made goods in the open market under an 
agreement, (voluntarily entered inta) by the States, which sought to 
maintain standards and price policies comparable with those of com- 
peting free industries. It was the contention of such industries as 
the Cotton Garment Manufacturing Industry, the Twine and Cordage 
Industry, the Furniture Manufacturing Industry and others less ef- 
fected that they could not. operate successfully under the codes of 
fair competition and meet the prices of prison-made goods in the 
competitive markets. There are two outstanding arguments against the 
sale of prison-made products on the open marketo 

First, the use of inmates in manufacturing, producing or mining 
products which later go to the public markets deprives free labor of 
that work. After a careful analysis of this phase of the prison-labor 
problem there remains little doubt as to the justification of labor's 
contention. It tends to hold the wage scale to a low figure, and it 
decreases the employment of free labor. The American Federation of 
Labor ! . . has on v p rious occasions stated that it favors the 
employment of convicts, but it has always fought the sale of prison- 
made goods in the open market. 

Second, the influence of priT.on-made goods on the price structure 
for any given competitive commodity sold on the open market should be 
considered. Because many prisons do not find it necessary to include 
all overhead on direct labor costs in quoting their prices, industry 



9742 



_p_ 



has always held that the comoetition of -orisons in the -oroduction and 
sale of commercial products is unfair and that -orison products are made 
and sold a'" very much lower prices than are comparable products of 
free indus ;ry a 

It is farther recognized "by uer.01 .'gical authorities, as well as 
those of frts industry-, that vhe abuse, shich have developed under 
■orison concrarvb systeaa has been a dfii):'! haudica-o to free industry 
Loth from the &tr.nd"ooiu'c of the -orocuctr-; F3.r.v..faGtured under these 
systems selling <.vfc ridiculously 'Jew orice-j and the demoralizing effect 
it has unon fr.ee industries ' manufacturing standards c Organized 
industry, as a rule, endorses and a-ouro-res the emoloyment of orisoners, hut 
they want them em-oloyec! at occupations which will result in the largest 
uossibie s-nread of enrol oy^i •*:•?':; giving due consideration to disciplinary 
and humanitarian treatment with a background of ,-orotection for the 
-oroducts of free la'Oor fur the -ouhllc market. Generally, industry 
favors some form of ''state uoe" as a solution to this oroblem. 

II. PRISON ■EXECUTIVES VIMp'qiST 

Practically all orison executives agree that urisoners must work 
at some useful occun&tio'u Th- old system of working inmates of an 
institution at some task 7.'hich is uc . Ih-x: v useful or necessary, is 
ranidly bTccming a thing of the paato The morals of -orisoners cannot 
he maintained ty merely assigning them to a job \rhich in the end will 
not "benefit either the prisoner or tho state. Consequently the -orison 
official of today designs work for his charges wnich will helo them 
morally and -ohysically and in many instances train them for useful and 
gainful employment uton their releasee 

A correct theory for the treatment of prisoners requires that 
they have a regular amount of work to do each day. It is the oroduct 
of this work or labor when sold on the market that raises the issue of 
competition of uiison goods versus free industry goods. Prison 
executives usually ooerate their institutions under "budgets and ao- 
-orooriations aouroved hy elected representatives of the neoole who, 
in turn, are comoelled to mainbain these institutions through taxation. 
Naturally these executives are continually striving to eliminate any 
unnecessary exoense and to discipline their inmates through croductive 
work which will "bring in some financial return. 

Due to the ever increasing demand to hold down the raiblic tax 
"burden, both orison officials and legislatures have a-oorc^ed the oro- 
duction and sale of various commodities as a means of Droviding 
revenue to -partially defray operating expenses . These exoenses 
generally include suo-olies, overhead and maintenance. Most authorities 
who have made adequate study of the- administration of orisons agree 
that whenever it is oossible to reduce the "burden for the taxoayer hy 
employing -orisoners at oroductive labor, -Droviding such enroloyement 
is on a basis that is equitable to all interests concerned, such 
reductions are readily recognized as good -orison administration. 



n 74?. 



-3- 



III. BENEFITS TO PRISONERS. •■ . 

The nature of the work prisoners should be engaged in varies accor- 
ding to types of crime the inmates are being punished for, conditions 
under which they must work, to what,, extent the products of their labor 
affect outside industry and what reaction the work has uoon them 
mentally end physically. These factors must all be given consideration 
by the -orison executives when planning for the proper administration 
of a penal institution. In addition, careful consideration should be 
given" to the rehabilitative features of the work. Criminals are sent 
to -prisons for -ounishment for the crimes they have committed against 
society. It is society's duty to see that they are provided with 
curative -punishment. 

It is also society's responsibility to see that the -prisoner is 
■provided with -punishment which will mean work. If this work can be 
so arranged that while the prisoner is being punished, he can he 
gf forded the opportunity to improve his mental, physical and re- 
habilitative' Qualities, he will be a much better citizen when 
released from the institution. It is with these objectives in mind 
that many nrison officials supply work for their inmates so that they 
will be prepared to meet the normal requirements of good citizenship. 

IV. PUBLIC VIEWPOINT 

The general -public believes that -prisoners should be -provided 
work. The Handbook of American Prisons &nd Reformatories, 1933, 
prepared by the Osborne Association, Inc., suggests that orison work 
should meet the following conditions, "(a) Have a definite vocational 
value to the individual; (b) be productive to the State; (c) conroete 
as little as possible with outside labor and free capital." These 
conditions seem to stand out clearly as a basis upon which prisoners can 
work and meet -public approval. 

Early in 1933 an editorial appeared in the Saturday Evening Post 
dealing with this problem. It is believed the following quotation 
from the editorial reflects the viewpoint of a majority of the public 
with regard to prison labor and the competition of prison-made goods. 

"Most important perhaps of all, the prisoners must 
not be idle and if there is not enough ingenuity to 
solve this particular problem, then we might as well 
give up in despair any attempt to handle the crime 
situation. Of all crimes against society none quite 
equals that of keeping prison inmates idle and un- 
occupied." 

At the present time there are many groups, each representing a 
different viewpoint continually propounding their pet theories upon 
governors, legislatures and prison executives. But, up to the present 
time, they have made little headway largely because of the different 



9742 



_A_ 



reactions on the part of the people from geographical, industrial and 
agricultural standpoints, This is recognised: "by tne different 
products manufactured and offered for sale on the public market hy 
various szc.be inr/ti .jufciono,, For example, Maryland and Tennessee, 
two industrial g'ucr^es, are engaged is iaanut'ac. taring cotton garments 
which later enter the -colic E'arket< tii . ota and the Lakotas 
manufacture binder twiie and place 5:t un „he open market, because they 
are in the grain producing region r -i : ,he coxmtry "here this oroduot 
is used ty fa; mars of Lh'&se states in the harvesting of their own 
cro-cs* This all goes Sy' ; show biiat the pe-ople of the various states 
approach the probleai from diifsrent- angles j The following quotation 
from the bullet i rig ''Prison Industries 1 '' commonly referred to as 
Domestic Commerce Series 'No, 27. published by the U. S. De-oartment of 
Commerce indicates that the -orison industries -problem is largely one 
for the states to handle: 

•'The orison industry problem is essentially a State 
affair. Since , near './y all the! -orisons are Ltate instil 
tutions t suppyrted, where necessary 3 by appropriations 
made by their legislatures, and '^ince the punishment 
of crime is -mostly the responsibility of the several 
■States,'. 'the method's of ca -g, 'of discipline^ and of re- 
.habiix option of-'Tjriscriers'miiai; necessarily be in each 
State a State problem, linkel closely with its legal 
code and its organization for the administration of 
justice TMb is particularly true because of the 
great difference's in laws' in the several States, dif- 
ferences in the methods of dealing with criminals, in 
the use of the parole, in the 'ek ten I of segregation of 
the various k: nds of •e-onv'.ctsj and ev:-n in the legal 
and public attitude toward the' problems of prison ad- 
ministration- :! 

V. RELATIONSHIP TO N. R. A. 

Shortly after the -or. s sage of the National Industrial Recovery 
Act the N.R.A. began to receive Preliminary drafts of proposed codes of 
fair competition as drawn uo and sponsored by industrial trade 
associations ar.d groups uf respective indua :-y members. It then 
developed that an attempt was being made ~oy the Cotton Garment 
Manufacturing Industry , the Retail -Trade Group, the Twine and Cordage 
Manufacturing Industry, the Farm Fqu'ioment Manufacturing Industry and 
the Furniture Mamifacturing Industry to do indirectly that which might 
not be accomplished directly through the insertion of restrictive 
clauses in their codes. Their objective was to prohibit members of 
these industries from handling ur selling prison-made goods. For 
illustration, the preliminary draft of the Cotton Garment Code as 
proposed by that industry, contained the following clause known as 
Article VIII: 



9742 



"No -oerson engaged in the Cotton Garment In- 
dustry shall, after November 1, 1937, manufacture 
or cause to be manufactured, or acquire, sell, or 
distribute in any manner whatsoever, any garment 
or pert thereof -oroduced in ^hole or in -cart in 
any publicly maintained -oenal or reformatory in- 
stitution, and no -oerson engaged in the Cotton Gar- 
ment Industry shall, after December 1, 1933, pur- 
chase from any such institution any textiles or 
materials or other sup-olies. The Cotton Garment 
Code Authority shall from time to time make such 
recommendations with respect to convict-made goods 
or orison competition as may be deemed necessary 
or helpful in aiding the effectuation of the policy 
of the title of the National Industrial Recovery 
Act and the provisions of this Code." 

Prison executives of the United States were familiar with the 
attempts being made by these industries to nlace such restrictive 
clauses in their codes, and therefore held a merting in New York 
City on July 13, 1933 and adapted the following resolutions: 

"WHEREAS, the employment of nrison^rs is absolute- 
ly essential to the development of a sane -orison -oro- 
grara fdr the protection of society and the rehabilita- 
tion of the prisoners, and 

"WHEREAS, the burden of taxes now resting on the 
peo-ole will be considerably relieved by the nro-oer 
em-oloyment of -orisoners, and 

"WHEREAS, in the formulation of the industrial codes 
-oroper provision for the employment of -orisoners should 
be adequately considered, 

"BE 'IT THEREFORE RESOLVED, that the National Recov- 
ery Administration be furnished with a copy of the fol- 
lowing' -orinciioles, and be urged to have the same in- 
corporated in the various industrial codes. 

"1. Each industry within the prison shall have the 
same hours of labor and working conditions made appli- 
cable to that industry by its -oarticular code. 

"2. All goods, wares and merchandise manufactured, 
■oroduced or mined by nrisoners shall have charged into 
the cost of -oroduction the same labor burden as a-onlies 
to the same industry in the section in which the insti- 
tution is located. 

"3. Each organized industry operating under a code 
shall make adequate -orovision fox- suirolying employment 
op-Dortunities to the men and woman in prison in fair 
pro-oortion to the number of workers enroloyed in that 
industry, 



974< 



-6- 



"4. Goods, wares and merchandise manufactured, mined 
or produced by prisoners in compliance with' the code of 
its particular industry shall ha/e the same access to mar- 
ket as similar goods, ware 1 ., or riierchandise manufactured, 
mined or produced- by free labor. '■ 

As a result cf thic meeting, l)r„ Louis IT. Robinson, one of the 
nation ? s outstanding penologist--' and professor at Swarthmore College, 
Swarthmore. if.rn:v'i\ , a:r..i, s»ao recommended i^'an adviser to represent the 
prisons in War.hi_.yuun oa all ma liters relating to the problems of 
prison labor v.hich were being considered in the formulation of codes. (*) 

These recommendations resulted in the selection of Dr. Robinson 
to represent the -orisons in this capacity-: 

The Precedent received a vigorous protest from the Governor of 
Alabama, which, in turr.- v,..r; referred 'o .'\ Sanford • Bates, Director 
of the Bureau of Federal Priscn.3; v~'^o presented the matter to General 
Johnson at the President's request in an effort to work out some 
compromise of this difficult problem. (**) 

•••: According to a memorandum of August 8, 1933 from Mr. John M. 
Keating, Legal Advisor- to Blackweil Smith. Assistant General Counsel, 
-.the • Governor's letter to the President on July C, 1933, stated quite 
unequivocally that he contemplated Cjurt action if any atterrrot was 
made to absolutely outlaw -orison labor and thereby take this property 
right from Alabama. With this threat before the Administration, it can 
readily be seen how the problem of orison-made goods in comoetition with 
free industry goods became an appropriate question for N.R.A, to solve. 
■Especially was this true when those industries most greatly affected 
by the coirroetition of -orison-made goods were striving to eliminate so 
far as possible the sale of pri son-made goods oh the public market. 
On the other hand, -orisons within the states maintained and operated 
under statutes and regulations prescribed by their respective legis- 
latures were looked upon as being in an entirely different category 
from private Industrial establishments.. In a memorandum of August 8, 
1933, from Mr, John M. Keating to Mr. Blackwell Smith, the following was 
stated: 

* 

"It is qiite ap-oarent from cursory perusal of the file 
and of HeleR.A. that the states which use prison l^bor to 
manufacture competitive merchandise cannot comply with the 
N.I.R.A. The particular reason for this is Section 7(a) of 
N.IcRoA. which reauires the right of employees to organize 
and bargain collectively and requires minimum pay and maxi- 
mum hours of labor. Further, than this the definition of the 
word 'person' in Section 7(d) probably do^s not include a 
sovereign state." ' 

(*) Letter of F. R. Cass, General Secretary, American Prison Assn., and 
Osborne Assn., to FranVlin D. Roosevelt, July 14, 1933. NRA Legal Div- 
ision Files. 
(**) Pa"-e 75 - Transcript of Hearing of Ulman Committee, Nov. 16, 1934. 

9742 



-7- 



It was then left for the states to voluntarily agree wi<*>n some form 
of a Compact which would encourage them to o-oerate their institutions 
and sell their nroducts in a manner comoarable to those nroducts sold 
by free codified industries on a oasis of fair competition. Thus a 
backer nunc' was established for the handling o~f the prison labor ^rob- 
lem in the N.R.A. 



9742 



CHAPTER II 
THS COiiPACT 

origii: 

The Compact originated in a decidedly different manner than 
did the codes of fair competition. 

The officials in charge of prison affairs in the various 
states enterel into the Compact as a result of vigorous effort on 
the part of certain industrial and labor groups to eliminate the 
sale of prison-made goods in the open market. — The principal oppo- 
nents "being manufacturers of cotton ga'ments, twine and cordage, 
furniture, fan machinery and the representatives of various labor 
interests. Although the first meeting of the prison executives, 
of which the II. R. A. has record, was helc. on July 13, 1933, in res- 
ponse to a call oy the Board of Directors of the American Prison 
Association and the Osborne Association in Hew York City, (*) there 
was a previous meeting in hay 1935, of a few of the prison executives 
of States engaged in industrial production and representatives of 
the Bureau of Federal Prisons. 

At this meeting initial steps '•'ere taken by those, present ■ to 'arouse in- 
terest in all of the States whose prisons manufactured goods for the 
onen market and to inform them that the Cotton Garment Industry, in 
anticipation of the passage of the Is.I.R.A. , was planning to pro- 
hibit the placing of prison made products on the open market through 
the- use of code provisions. It was due to the intense interest de- 
veloped at this iJay meeting in hew York City that a second meeting 
was called on July 13, 193", inviting prison representatives of all 
the states to attend. 

CLn August 2nd and 3rd, 1933, the Public Hearing on the Cotton 
Garment Code was held in Washington and at that time the draft of 
the code contained a clause (Article VIII) (**) which prohibited 
the use of prison labor or the sale of products made in whole or in 
part in a. prison in the Cotton Garment Industry. The code for the 
Retail Trade which was also being considered at this time, like\7ise 
contained a prohibition of the sale of prison-made products by re- 
tail stores. Therefore, it became necessary for the prison offi- 
cials to prepare and submit some form of an agreement which would 
assure that prison-made products would be sold upon the open market 
in fair competition with the products of free industry. 



(*) Page 8, ante. 

See also Statement of Howard B. Gill, Economic 
Adviser of the Prison Labor Authority. 

(**) Page 8, ante. 



\ 



5742 



-9- 

On September 8th and 9th, 1933, there was held in Washington 
another meeting of a group of prison executives which represented 
5.° states and the Bureau of federal Prisons. At this neeting, it 
Has decided to r.ahe application to the President of the United 
States for a code of fair competition for the Prison Industries 
under Section 3 (a) of the national Industrial Recovery Act. As^a 
result thereof the first draft of the proposed code was submitted 
to the 17. R. A. (*) After this proposed Prison Industries Code had 
"been submitted to the 17.R.A. it was referred to ilr. John Keating 
who indicated that it was an impossibility to consider a code of 
fair competition for the Prison Industries under the IT. I. 2. A. be- 
cause all codes had to include Section 7 (a) of the Act and compli- 
ance with such a provision on the part of the states would be out 
of the question. This opinion is likewise supported by a letter 
from I.r. Sanford Bates, Director of the Eureau of Federal Prisons 
to General Johnson on September 20th which, in part states as 
follows: 

"I am inclined to agree that strictly speaking the 
statement of principles ennnot be considered a statu- 
tory code. The important thing, of course, is to 
bring about uniform and fair treatment in the prison 
labor situation the country over and it seems to me 
this cannot be done unless the question of prison la- 
bor is entirely kept out of the various codes. Refer- 
ence could then be made in each code to the agreement 
among prison people which could be given your sanction 
and so far as circumstances will permit be made bind- 
ing upon the members of each industry and the states 
themselves. n 

However, Mr. Bates did indicate that it would be possible to 
work out an agreement among the prison officials and executives of 
the States, which could be given 1T.R.A. sanction end made binding 
uoon the respective States which voluntarily signed the agreement. 

On September 28th, Ilr. heating submitted a letter to i!r.Bates(**) 
setting forth the legal objections to the proposed code for the pri- 
son industries. This letter further indicates that possiblj'- a vol- 
untary agreement between the states under Section 4 (a) could be 
worked out. The following quotation from this letter sets forth 



(*) Application for a Prison Industries Code found in 
N.R.A. Prison Labor files (former Public Agencies 
Division files.) 

(**) Letter found in 1T.R.A. Legal Division Files. 



974-2 



-10- 

lir. Keating' s views: 

"It would appear to the writer that the code in its 
present fom cannot "be considered a code under Section 
3, Title I of the national Industrial Recovery Act, as 
apparently attempted, for the reasons that Section 7 (a) 
and 10 (b) of ' T .I.H.A. are not included. As you "ill 
note by reading Title I of 1T.I.R.A. it is mandatory that 
every code approved by the President under Title I in- 
corporate these provisions of IT. 1. 3. A. 

"It would appear to the writer that it is impractical 
to consider a code which would incorporate these sec- 
tions, particularly Section 7 (a) which deals with col- 
lective bargaining. It is probably impractical to con- 
sider collective bargaining with prisoners. It is fur- 
ther probably impractical to ask the governors of sove- 
reign states to subscribe to a code which the President 
has the right to modify under Section 10 (b). 

"The writer considered tailing action under Section 4 (a) 
of the Act covering voluntary agreements, but it will be 
noted that this section provides as follows: 
•The President is authorized to enter into agreements 
with, and to approve voluntary agreements between and 
among persons engaged in a trade or industry , labor 
organization , and t rade or industrial organizations , 
associations or group s relating to any trade or industry . ■ 

"The tern person is, defined in Section 7 (b) of the Act 
as 'any individual, partner, association, trust or corpor- 
ation. ' It would appear doubtful whether the President 
is authorized b3 r this section to enter into an agreement 
between states. 

"However, it would appear to the writer that the action 
contemplated under this agreement could be accomplished 
"'oy a Compact between states as it is contemplated in 
Section 10 of Article I of the Constitution." 

On September 30th, Lir. Bates advised L'r. Keating that for the pre- 
sent he recommended that any clauses regulating prison labor be omitted 
from codes on condition and with the understanding that a Compact agree- 
ment be worked out between the various states which would effectively 
solve the question. He further advised that if this was not deemed 
feasible, Lir. Keating could have the g.H.A. postpone for six months 
the date when the clauses affecting prison labor became effective pend- 
ing the drafting and submission of a Compact agreeable to the President 

(*) Letter found in U.K. A. Legal Division Piles. 



5742 



-11- 

and in the event no satisfactory agreement was reached that the clauses 
would then be reinstated. (*) 

Between October 1st and October 17th, when the prison-made goods 
provisions were inserted into the then pending Retail Code consider- 
able informal discussion took place between the prison officials repre- 
sented by Lir. Bates and his assistant, Mr. J. V. Bennett, together with 
Mr. Keating of the 17.R.A. and Lir. Raymond Walsh, counsel for the Cotton 
Garment manufacturers and the Twine and Cordage Institute. The result 
was the insertion in the Retail Code of the prison-labor provision which 
was proposed by General Johnson, and later this provision was included 
in the Cotton Garment Manufacturing Code. 

The national Recovery Administration, in a memorandum of 
October 25, 1935, issued the following statement of policy: 

" Prison-hade Goods . A code may include a provi- 
sion forbidding transaction in Prison-made goods 
at rjrices lower than the lowest reasonable cost 
or price in private commerce." (**) 

As a result of this statement of policy , Lir. Keating, informed 
lir. Blackrell Smith, of the following: 

S3 
who in 'turn has given assurance to the governors of the 
48 states that the provision regarding prison labor in 
all codes would be based on the fundamental principle 
of the Prison Labor Provision in the Retail Code." (***) 

Thus, it became necessary for the prison executives of the var- 
ious states to develop a voluntary Compact with the definite objective 
of materially assisting in effectuating the policies outlined in 
Title I of the national Industrial Recovery Act. 



(?) 1T.R.A." Legal Division Riles, "prison Labor General 1933" 

(**) Confidential Policy Memorandum of II. R. A. 
dated October 25,. 1933. 

(***) Memorandum from Mr, Keating to Blaclrwell Smith 
of October 30, 1933- 
Prison Labor General Files. 



9742 



-12- 

II. OBJECTIVES 

In most respects the principles laid down by the prison executives 
in the resolution -oassed at the 'meeting in lew York City on July 13, 

1933, (*) covered the obj actives they had in mind when they later agreed 
to bind themselves together under the :.:ompact. However, when the 
Compact reached it", final stages of development, Ganersl Johnson sub- 
mitted a letter of transmittal to the President under date of April 18, 

1934, which, in part, sets forth the following concise and detailed 
objectives of the Compact: 

"This has-been the result of a long and continuous 
effort by this Administration to establish end maintain 
fair competition between products of private domestic 
indiistry and those of prison industry. 

"The Compact, (*) covers products mined, manufactured, 
produced ^or distributed by orison labor in the states 
signatory to the Compact, It limits the hours of labor 
in prison industries to nob mere than those prescribed 
in the applicable code, adopted irnder the laws of the 
United States governing each particular industry, and 
provides further that in no caso shal? any inmate be 
required or permitted to work more than forty hours in 
any one week. The hours of operation of productive 
machinery are limited to not more than is prescribed 
in the Code of the competing private domestic industry. 
It prohioits the employment of persons under sixteen 
years of age in any prison industry and of persons 
under eighteen years of age at operations or occupa- 
tions which are hazardous in nature or dangerous to 
health. 

"The Compact further provides that prison products 
when sold by the prison or through a contractor, shall 
be sold at prices not lower than the fair current prices 
prevailing in the market in which the product is custom- 
arily sold. It provides th?t where contracts for the 
labor of prisoners are me.de they must insure a return 
from the contractor of an amount equal in value to the 
cost per unit of product for labor and overhead necess- 
arily paid in competing domestic industry on the com- 
parable product. •■ ■ 

"A Prison Compact Authority is established in the Compact, 
consisting of nine individuals, six of whom shall be elected 
annually by representatives of the states signatory to the 
Compact, and three to be appointed by you to represent 
labor, industry and consumers, respectively. 

"This Authority will administer the Compact, make rules and re- 
gulations, establish a uniform cost finding system and determine 
the prices below which prison products shall not be contracted 
for. The Authority may require reports and statistics necessary 

(*) Pages 9 and 10 ante. 

(**) The Compact, See Vol. 9 Page 731 Printed Code. 

9742 



-13- 

to effectuate the policies of the Compact from the states signatory 
to the Compact. To do away with one of the serious abuses resulting 
from -orison labor, the Authority is vested with power to require 
diversification of the output of orison industries in fair propor- 
tion to the industries affected and is given definite power to 
Prohibit. the. expansion of any existing prison industry which bears 
a disproportionate share of competition. The Authority is 
authorized to hear and adjust complaints arising under the Compact. 

•"The decisions of the Prison Compact Authority are subject to 
appeal from the Authority to you or to the person to whom you 
delegate your functions vested under the Compact." 

In addition to the above, it was the intention of the sponsors 
to have as many states as possible, along with the Federal Department 
of Justice and the District of Columbia, a-prove the Compact regardless 
of whether or not such states' prison industries operated on a state- 
use system. It is to be remembered that the Compact does not apply to 
state-use products and public worhs. This exemption is set forth in 
Article VI of the Compact and reads as follows: 

"The restrictions in this compact shall not apply to goods, 
wares, or merchandise manufactured, produced or mined by any 
penal or correctional institution which are solely for the 
use of tax-supported institutions, agencies, departments, or 
activities of any state or its political subdivision, nor 
•shall the^ apply to the constraction of public worhs or ways 
financed 'wholly from funds -of the state or its political 
subdivision. " 

In addition to Article IX, Section 3 of the Retail Code as ap proved 
October. 21, 1933, setting forth certain provisions relative to the sale 
of prison-made goods, the Cotton Garment Code as approved November 17, 
1933, carried under Article VIII a similar provision relative to the 
handling of prison-made goods by members of that industry. Both of these 
provisions were stayed for a reasonable length of time pending the 
formulation of a Compact between the states engaged in the production 
and sale of prison-made goods in the open market.. The Executive Order 
approving the Cotton Garment Code likewise prohibits the members of 
that industry from enforcing certain prohibitive clauses against prison- 
made products pending the approval of the Compact. With these pro- 
visions in the Retail Trade and Cotton Garment Manufacturing Codes, it 
is apparent that the objectives sought through the adoption of the 
Compact were not sponsored entirely by the prison groups. Here it is 
readily understandable that free competing industries, through their 
codes, were able to force the greater portion of the prison industries 
under some form of a Compact which would have to meet the approval of 
both prison executives and free industry. Thus, the N.R.A. was the 
agency through which both groups worked to pl^ce their objectives re- 
garding prison industries into a workable- agreement. 

III. FORMULATION. 



-14- 

After the opinion by the Legal Division (*) that a Code »f Fair 
Competition for the Prison Industries of .America could not be approved 
under the National Industrial Be cove ry Act, it - then became -the --— -- 
responsibility of the prison officials and the N. R, A. to formulate 
a plan which the states could agree ; ',o'',o, whereby they could. dis; ose.of 
their prison products on a basis comparable to those of free industry, 
assuring free industry that it could aj far as possible place its 
goods on the open market in a fair competitive manner. Inasmuch as Mr, 
Keating' s opinion sets forth the fact that under Section 4 (a) of the 
Act the states could enter into a voluntary agreement, subscribing to 
the objectives referred tn above, the prison executives appointed a 
Committee consisting of Mro John J. Kannan of Wisconsin, Chairman, Mr* 
Harold E. Dornell of "M a ryla"a6, Mr. C. L, Stebbins of Michigan and Mr. 
James V, Bennett of the U». 5, Department of Justice to formulate a 
Compact* The Coramittae, after conferences with the representatives of 
the affected free Industries and the. legal Division, the Industrial, 
Labor and Consumers Advisory Boards of the N.R.A., submitted a draft 
of the Compact to General Johnson, on December 8. 1933. Accompanying this 
draft of the Compact, was a latter indicating that this proposal had 
been submitted to irepresentatives of the American Federation of Labor 
and to the Secretary of Labor, and it was the understanding of the 
sponsoring Committee that the draft as submitted was acceptable to them 
as well as to the Advisory Boards. Shis letter further requested that 
if the proposed Compact was satisfactory to G e neral Johns oh the committee 
desired to obtain the approval of a substantial majority of the states 
prior to January 1, 1934. (**) 

On December 9, 1933, General Johnson wrote a letter to the Prison 
Industries Code Committee c/o John J. Ilannan, Chairman, as fnllows:(***) 

"I have the Compact «f ..Fair Competition for the prison Industries" 
submitted with your letter of December 8. 

"I have carefully examined it and I have submitted it t* the Labor 
Advisory, Industrial Advisory and Consumers Advisory Boards of this 
Administration, 

"The Compact as drafted is hereby approved by me- -and you are advised 
that the Compact satisfies me under the terms of the Prison Labor 
Provisions in the Retail Code and the*. Cbt^ottj-ficjanelit codec. When and 
so long as any penal institution subscribed to, complies with and 
makes effective this compact, the restrictive provisions of the Retail 
Code and the Cotton Garment Code shall not apply to products of said 
institutions. 



(*) Pages 14, 15 aid 16 ante. 

(**) Refer to N. R. A. Legal Division files and Prison labor General files. 

(***) II. R, A, Release No, 2217 



, 



9742 



-15- 

"You may "be further asured that Prison Labor Provisions hereafter 
approved in codes of fair competition under the I\ T a tional Recovery 
Administration, shall be consistent with the provisions of the 
Retail Code and the Cotton Garment Code and this Compact." 

Another letter under date of December 9; 193.3,' submitted by Raymond 
A. Walsh to Mr. John Keating of"* the Legal Division, includes a statement 
to the effect that generally speaking the Compact was satisfactory and 
that he had no fundamental objections to it. (*) 

Copies of the revised Compact were then submitted to the various 
prison executives of the states for their approval accompanied by an 
explanatory statement signed by the Prison Labor Committee. (**) The 
explanatory statement called attention to the. changes that had beer- 
made in the revised Compact as compared with those originally submitted 
in the Prison Industries Code. 

Following General Johnson's letter to Col. John J. Hannan, Chairman, 
of the Compact Committee, explained that the Compact as drafted met his 
approval, the Code Committee issued a call- to the various state prison 
executives requesting that they meet on January 18, 1934, for the purpose 
of organizing the Association of States Signatory to the Compact of 
Pair Competition for Prison Industries of the United States of America. 
On J a nuary 13, 1934, there were assembled in Washington, thirty-one 
prison officials representing 23 states and the Department of Justice 
in a meeting which resulted in the organization of States Signatory to 
the Prison Labor Compact. ( ***) After the Association was duly organized 
a suitable constitution' and set of by-laws was adopted for the purpose 
•f conducting the affairs of the signers of Compact of Fair Competition. 
(****) The Associations of states Signatory to the prison Labor ^Compact 
from then on acted in a similar capacity in respect to prison industries 
as" trade associations did with respect to free industry. 

After the Association was duly organized and its constitution and 
by-laws adopted, six members of- the Prison Labor Authority, were elected, 
representing states signatory. The members elected were as follows: 
Colonel John J. Hannan of Wisconsin, H. E. Donnell of Maryland, Dr. Walter 
N. Thayner of !T e w York, William P. Peagin of Alabama, S. 3. Hunter of 
Missouri, C. L. Stebbins of Michigan. It is to be remembered that these 
men were elected as a more or less temporary Prison L a bor Authority pending 
the final and formal approval of the Prison Labor Compact by the President. 

— - . — i— rf2s» 1! — __ __ . _ , 

(*) IT. R. A. Legal Division Files, Prison Labor General. 

(**) Prison Labor Minute Files, 1934. 

(***) p r i S on Labor Meeting Files, Deputy's Files, 1934. 

(****) prison Labor By-Laws Files, Public Agencies Division, Prison 
Labor Files. 



9742 



-16- 

On January 19, 1934, in Washington, D. C. , the elected members of the 
Prison L a bor Authority assembeled and selected the Following as their 
officers: Col. John J. Hannan, Chairman of the State Board of Control 
of Wisconsin, Chairman; H. E. Donnell, Superintendent of Prisons for the 
State of Maryland, Vice- Chairman; Janes V. Bennett, Secretary-Treasurer, 
Mr. Bennett., of the Department of Justice wns Assistant to Mr. Sanford 
Bates, Superintendent of the Federal Bureau of Prisons. 

During the interim from December 9, 1933, to April 18, 1934, 
the Prison groups through their temporarily elected Compact Authority 
were able to secure the signatures of the governors or prison executives 
of 28 states to this Compact and on April 18, 1934, General Johnson 
the Administrator, forwarded the Compact, accompanied by a letter of 
transmittal, to the President. 

IV PRESIDENTIAL- APPROVAL. 

The President, by Executive Order, gave his approval to the Compact 
on April 19, 1934. This Executive Order also appointed the following 
men: Thomas A. Rickert, Samuel A. Lewison and Thorsten Sellin, as members 
of the Prison Labor Authority to represent labor, -industry and consumers, 
respectively. The Executive Order is attached to the Compact. (*) 



o 



Thus, this , Compact, signed by the various states as a voluntary 
agreement, became effective upon approval by the President. 



(*) The Compact, See Vol IX, Page 7.31, Printed Code. 



9742 



-17- 

. . . CHAPTER III 

THE PRISON LABOR AUTHORITY 

I. CONFERENCES WITH COTTON GARMENT CODE AUTHORITY. 

On January 19, 1934, in Washington, ' D. C, a joint conference 
was held "by the Prison Labor Authority with representatives of the 
Cotton Garment Cede Authority. The nuroose of this conference was 
to determine insofar as possible, the manufacturing costs of work- 
shirts and workpants in the free industry plants operating under the 
provisions of the Cotton Garment Code so that the prisons might he 
ahle to put into effect similar charges for the manufacture of like 
products. (*) 

The information submitted by the representatives of the Cotton 
Garment Code Authority indicated that the cost per dozen for No. 2 
chambray workshirts in a factory manufacturing four hundred thousand 
dozen or more per year, all employees working on a 40 hour week basis 
at a minimum salary of $13.00 a week, varied from Si. 64 to Si. 82 per 
dozen, and that costs for manufacturing in the South where the southern 
differential in wage scales applied, would be approximately eight 
cents per dozen less'. On No. 4 union special workpants, the Cotton 
Garment representatives contended that the manufacturing costs varied 
from $1.63 to $2. 95-? per dozen. The lower figure was submitted by a 
prison contractor operating in the Maryland* State Penitentiary. 

The conference then adjourned until January 20, 1934, when an 
extended discussion took place as to whether the -orisons should be 
allowed a differential because of the sales resistance to -orison made 
goods. There was also considerable discussion as to the factors which 
should be considered in setting sales prices of -orison made goods. It 
finally seemed to be the concensus of opinion that the Prison Labor 
Authority would have to determine first, the following ouestions: the 
labor cost per unit which each state should collect; second, where the 
state w?' s in the State- Account-System what -orice the state should charge 
to the jobber, distributor or retailer. During the course of the dis- 
cussion Mr. Hunter of the Cotton Garment Code Authority made the state- 
ment that - "One of the shirt conroanies w-: s currently manufacturing 
shirts in the Alabama Prison for which they were paying only seventy 
cents per dozen. Obviously this was too low a price and that both 
parties to this contract should be requested immediately to make some 
revision. " 

As a result of this condition the Chairman of the Prison Labor 
Authority appointed Messrs. Donnell, of Maryland; Feagin, of Alabama, 
Hunter of Missouri; and Stebbins of Michigan, to discuss and work out 
the problems which then existed. 

The Prison Labor Authority and the Cotton Garment Code Authority 
met again in Washington, D. C. on February 20, 1934, for the purpose 



(*) Minutes of, Prison Labor Authority Meeting, January 19, 1934. 
9742 



-18- 

of determining, ss set forth in Subsection. (d) of Article VIII of the 
Convoact, the prices, charges gjjd ampjunts to be established for work- 
shirts, workpants and dress shirts, At. tliis- mee.tingO.ir. Arthur Schwab, 
who had previously been engaged to make an investigation of the cost 
of -producing the above-mentioned articles , submitted figures from a 
number of manufacturers on standard grades of workshirts. This re- 
sulted in an agreement wherein the Got ton Garment Code Authority 
acquiesced in a diff eren'viri for prison made shirts in favor >of -orisons 
to the exteny of 10$ or a-oprcximat^ If $0>12fs cents per dozen. -.(*) 
Likewise agreements were reached between the Prison Labor Authority 
and reprsseirtaii:; v.rs of the Cotton Gariiieiit Code Authority on. mark-ups 
as follows; 5-j to manufacturer" ., lC* to jobbers and 20": to retailers. 
On workparts it was agreed to give a differential 1 of' 10 cents per 
dozen, The following schedule was tentatively approved as the amounts 
to be charged by bo-'-h prisons and the free Industry manufacturers for 
labor and overhead on workshirOo and dress shirts and workpants. •■(**) 

Work Shirts • 'Dress Shirts Work Pants 

Direct labor' charge ' .'01.10 41.75 01.87 

Total Overhead, charge $' .40 •' $1.00; ■■ & .73 

This agreement in a general' way appeared to meet the' .'approval of 
both the Prison Lab or ' Autre i ity find the col, ton -garment manufacturer. .. 
However, it will ' e ob'serVrd later in" this report that the Cotton 
Garment Code Authority could not control the prices that the various 
members of that industry charged, due I .rgely- to the fluctuation in. 
the price of raw materials. The prieens then resorted to the method of 
using the lowest prices ouoted in the market by free indrs try manufac- 
turers as the basis for their sales- This action vas taken by the 
Prison Labor Authority from time to time'as information !was received 
by them that free industry -prices had been xoweredv 

On February S3, 1934j'Mr. Howard E', Wahrenbroek, Assistant Counsel, 
Legal Division, IT. 3. A. ,' submitted a memorandum for the Legal Division 
Prison Labor General Pile verifying a telephone conversation v/Mch he 
had with Mr. , Bennett of the Prison Labor Authority wherein iti is stated 
that he, Mr. Wahrenbroek, "suggested the dubious legality of some of 
the tilings that may have been done by representatives of industry 
relative to prices iri recent' 'meetings of the Prison Labor Compact 
Authority with rearesen- atives of Industry and requested Mr. "Bennett to 
withhold general dissemination of ins true tiohs relative to prices for 
the present-" Thib memorandum clearly sets forth the doubts of the 
Legal Auviser as to the legality 'of an?/ agreements relative to overhead, 
labor costs, discounts and differentials .which might have been entered 
into at joint meetings of 'industry representatives with the Prison Labor 
Compact Authority. 

' . , ., h-ri-i ~ - . 

(*) See Minutes of Meeting of Prison Labor Authority, January 20, 1S34. 
(**) See Minutes of Meeting of Prison Labor Authority, January 20, 1934. 



9742 



-19- 



On April 13, 1934, another joint meeting of the Prison Labor 
Authority and representatives cf the Cotton Garment Code Authority wa.s 
held in Washington. The principal nt tters discussed at this meeting 
involved the question gf the fair charge for contract prison labor 
and was held to be "equal in value to the cost -per unit of production 
for labor and overhead necessarily paid in competing domestic private 
industry on comparable production. " This charge was to be determined 
with respect to work shirts and dress shirts. 

Due to a tentative agreement entered into at a meeting on 
February 20, 1934, wherein the charge for labor and overhead in the 
manufacturing of dress shirts wes decided to be '"52.75 per dozen, it 
was contended by Mr. Feagin and Mr. Stewart of Alabama that the 
Alabama Prison shirt factory had been forced to close down. This 
matter was brought to the attention of the Prison Labor Authority 
at the April 13, 1934, meeting at which was discussed at some length 
conflicting figures as to labor costs and overhead submitted by two 
industrial engineers, one representing the Cotton Garment Code 
Authority and one introduced by a prison manufacturer. The result was 
an agreement that the charge for direct labor in the manufacturing of 
dress shirts should be $1.50 per dozen and the overhead charge be 
$0. 94 per dozen making a tot' 1 of $2.44 per dozen. 

It was at this meeting that the Cotton Garment Code Authority 
entered a complaint against the State of Tennessee for contracting 
and manufacturing for their account an order consisting of many 
thousand dozens of workshirts at a direct labor charge of SO. 71 per 
dozen. 

In a memorandum from Mr. Sidney Prince, Jr., Legal Adviser, IT. P. A., 
to Mr. Linton M. Collins, Deputy Administrator and Acting Division 
Administrator of Division 8, on April 16, 1934, it was stated that: 

"Mr. Palph T Iunter and Mr. Walsh, Counsel for the Cotton 
Garment Code Authority at this point expressed great 
skepticism concerning the effectiveness of the Compact. 
They called it a scrap of paper and stated that they 
thought that the conference should adjourn and that 
they should seek the im::iedia.te restoration of the in- 
hibitive clauses of the Retail Code which would prevent 
the sale of any prison made goods by any retailer." (*) 

Upon the advice of Mr. Prince, the Cotton Garment Code Authority 
was requested to enter a complaint against the State of Tennessee to be 
lodged with the Prison Labor Authority pursuant to Article VII, 
Section 2, subsection (g) of the Compact, After the Prison Labor 
Authority had taken action upon this matter so that it could be re- 
viewed by the delegate of the President, acting under the authority 
of Article VII, Section 2 of the Compact, both groups appeared satis- 
fied and a break was averted. (**) 



(*) Memorandum 6f April 16, 1S34, from Sidney Prince, Jr., to 

Linton M. Collins, Acting Division Administrator, Prison Labor 
Minutes File. 

(**) Memorandum of April 16, 1934, from Sidney Prince, Jr., to 

Linton M, Collins, Acting Division Administrator, Prison Labor 

9742 '' itt^es File. 



30- 



At a meeting of the Prison Labor Authority on April 14, 1934, it was 
decided to send Mr. Chapman of Missouri to the State of Tennessee to 
discuss the matter with the authorities there and attempt to have 
them conform to the labor and overhead charges as agreed upon in the 
meeting of February 20, 1934. 

Another joint conference of the Prison Labor Authority and the 
Cotton Garment Code Authority was held on August 30, 1934, in 
Washington, D. C.., at which time a Committee of four was appointed 
(two representatives of the Prison Labor Authority- and t^o of .the 
Cotton Garment Code Authority) to work out further differences between 
the two authorities regarding the sale. of cotton garments. At this 
conference the .Cotton Garment Code Authority entered nrotest against 
the State of Delaware. Florida. Indiana and West Virginia, relative 
to their activities in disposing of -orison made goods without the use 
of the Prison Compact label* The records of the Prison Labor 
Authority shuw that the authority had taken action prior to this 
conference and that. orders for label? had been received from the 
States of LV" aware, Florida a.nd Indiana to be used in accordance with 
the rules and regulations as laid dowr by the F,~l.A. and the Prison 
Labor Authority, however, it is to be noted that Florida did not 
become signatory to the Ijompact until Only ?5, 1934. 

Adjustment of the complaint against the State of West Virginia 
was made by the Frison Labar Authority and the prison officials of 
that state as a result of chis protest. 

It was at this conference that the Prison Labor Authority notified 
the Cotton Garment Code Authority; that it had temporarily abandoned 
the provisions for overhead which that Authority had agreed to earlier 
in the : year as a .basis for determining the cost per unit of production. 
This action was taken because cf the prevailing prices on comparable 
garments offered in competing areas by priva-oe manufacturers operating 
under the Cotton Garment Code, which va.ried to such an extent that no 
uniform basing price could be adhered L'-. rv 'ic Cotton Garment Code 
did not contain provisions fixing the prices of its products when sold 
in the market, ^rever, the Prison Labor ^u'^hcrity agreed to consider 
a sliding scale of overhead and labor charges to be used in contract 
prisons, based upon the agreements entered into with the Cotton Garment 
Code Authority in February, 1934. (*) 

It was at this conference that the Prison .Labor Authority urged 
the Cotton Garment Oode Authority to use its good offices in an effort 
to eliminate advertisements against prison made goods manufactured 
under the terms of the Compact. 

II. CONFERENCES WIT! - TWINE AIT) CORDAGE CODE AUTHORITY 

On January 20, 1934, the Prison Labor Authority met with repre- 
sentatives of the Cordage and Twine Industry in an effort to agree upon 

(*) Minutes of Prison Labor Authority, August 31, 1934.. 
Prison Labor Minutes File. 



9742 



-21- 

the fair market price for "binder twine, but inasmuch as the International 
Harvester Company was not representee 1 at this meeting and as it was 
one of the major nrivate industries manufacturing and marketing twine 
in competition with -orison twine, it was deemed advisable that the two 
groups meet in Chicago on February 6, 1934, at the Hotel Stevens where 
all interested parties could be aeard and obtain more complete data 
with res-pect to the manufacture and sale of binder twine. This proposal 
was agreed to by both factions and a sub-cemmittee of the Prison Labor 
Authority known as the Binder Twine Committee was appointed to repre- 
sent the Prison Labor Authority at this meeting. The arincipal thing 
accomplished at the meeting of February 6, 1934, was that the prisons 
tentatively agreed to reduce their production of binder t^ine in 1934 
to approximately 39,000,000 pounds as comp-red to 59,0^0,000 pounds 
produced in 1933. An effort was made to get together on price differ- 
entials and quantity discounts based upon current prices; however, 
inasmuch as in the State of Minnesota the Price of binder twine sold 
by the state penitentiary is determined by a State Statute passed by 
the legislature, it was impossible to ente~ into any permanent agreement 
with respect to discounts and differentials. The following is the 
suggestion which wrs offered at the close of the meeting and was to 
be considered as a basis for the year 1934: 

"l/8^ for 10,000 pounds and less than a carload 

l/4<# for carload lot 

3/4^ any amount to jobbers who purchased from 
200,000 - 250,000 pounds a nnually 

1$ for 300,000 rounds to above 

l-l/4^ for 1,000,0^0 pounds and over 

The differentials which it was fglt that could be 
allowed to the prisons were • s follo-'s: 

Missouri, Michigan, and Cklnhoma; l/°? a pound, 
and the same discounts as the International. 

Minnesota: A differential of l/4^ a pound, with a 
discount of: 

I /'St on 3,000 pounds 

l/4^ on 10,000 pounds 

\j n 4 on 20,000 pounds and over. 

Wisconsin: l/2c* a pound differential, with the s ; me 
discounts as Minnesota; other than that Wisconsin 
should have the right to give for tne amounts in 
excess of 20,000 pounds, the same discounts as are 
provided in the International schedule of discounts." (*) 

(*) Minutes of Binder Twine Meeting of February 6, 1935, Prison Labor 
Minutes, Deputy's files. 



9742 



_32- 

The Binder Twine Committee of the Prison Labor Authority met 
again on March 22, 1935, at Chicago, with representatives of six 
major Binder Twine free industry manufacturers and officials of the 
states which manufacture hinder twine in their prisons, in an effort 
to agree upon prices and discounts for which this product should he 
sold during the year 1935. At this meeting the -orison officials 
insisted that they he allowed to sell prison made twine at a differ- 
ential of 1/2 cent per pound less than free industry, regardless of 
the sale nrioe. However, ■ they did agree to follow the same oasis of 
quantity discounts usinj the retail >rice cf ?■% cents per pound "based 
upon manuka civring costa. Free industry twine manufacturers would not 
agree to such a large differential. They indirectly agreed to grant 
the prisons l/4 of • a. cent per oound differential which the prisons 
were reluctant to accept. The reasons given by the prisons for not 
accepting this' small differential was the unfavorable advertising 
which some of the free industry people were carrying on in an attempt 
to discourage the sale of prison made hinder twine* 

On April 30, 1935, at Madison, Wisconsin, the Prison Binder Twine 
Group met again and determined-' the differential for prison made twine 
to be 1/2 cents per pound. The result was that free industry could 
do nothing about it as each twine producing state could fall back on 
their sovereign rights and sell their products at prices comparable to 
those of free industry. This was verified by the adoption of a price 
policy by the Prison Labor Authority at their meeting of May 10, 1935, 
in Washington. This policy was as follows: 

"That the base price which shall bo used by the Prison 
Labor Authority as the prevailing low price for binder 
twine for 19-^5, shall be the lowest net price offered 
by representative Private firms after deducting all dis- 
counts. That tne 1935 differential on binder t'-dne for 
prisons shall ' not exceed- 1/2 cent -or pound." 

At a joint meeting between the Binder Twine Committee of the 
Prison Labor Autnority a rid the Binder' Twine Committee of the Twine and 
Cordage Code Authority in Chicago on March 22, 1935) considerable dis- 
cussion was held on the subject of the proposed legislation than before 
the Minnesota State Legislature with respect to the sale of binder twine 
manufactured in that state. This legislation proposed to set a price 
on binder twine to be sold by tne Minnesota State Prison to the 
retailer and farmers of that state. Although those present at the 
conference realized that it w.- s impossible for the 1T.R.A. to stop this 
legislation, the concensus of opinion was that all sales of binder 
t^ine manufactured in the Minnesota nrison and sold outside the state 
by the State Prison should be sold in accordance with the : prices filed 
by the affected Code Authority and the Prison Labor Authority. 
Mr. McMullen, Superintendent of Prison Industry of Minnesota, although 
not in a position to sneak officially, indicated that the Prison Board 
would be willing to conform 'to such an agreement. 

At this same Conference it was agreed that the 3inder Twine Com- 
mittee of the Prison Labor Authority would recommend the establishment 
of an open price filing system with the Prison Labor Authority for all 

9742 



-23- 

states engaged in the manufacturing of tinder twine and the placing of 
the s=me on the ot»en market. These filed price.s were to be ooen to 
examination by members of the Twine and Cordage Manufacturing Industry, 
providing they likewise left their records of the prices filed by them 
with the Twine and Cordage Code Authority open to examination by the 
various members of arisen industries. This resulted in each affected 
Authority being able to obtain the most recent information regarding 
prices and in turn resulted in a better understanding regarding market 
conditions affecting the sale of binder twine. 

The remaining important matters discussed at this meeting on 
March 22, 1935, was that of soliciting cooperation between the Binder 
Twine Committee of the Twine and Cordage Code Authority and the Binder 
Twine Committee of the Prison Labor Authority in carrying out a 
program of requesting an embargo for at least a one year period on 
the importation of foreign twine or foreign materials used in the 
manufacture of binder t^'ine. Those present agreed to give their 
support and endorsement to a petition which had previously been filed 
by free industry Bander Twine manufacturers with N.R.A. requesting 
that this embargo be granted under Section 3 (e) of the National 
Industrial Recovery Act. (*) 

III. ELECTION OF FORMAL PRISON LABOR AUTHORITY 

At a meeting of Prison Labor Authority on May 1, 1934, in Washing- 
ton, D. C. the following "ere formally elected officers of the 
Authority: 

Sam Lewisohn, New York, Presidential Appointee, Chairman 

Col. J. J. Hannon, Wisconsin, Representative of Binder 
Twine States, First Vice Chairman. 

H. E. Donnell, Maryland, Representing the Cotton Garment 
Manufacturing States, Second Vice Chairman. 

James V; Bennett, Federal Bureau of Prisons, Secretary- 
Treasurer. (**) 

The other representatives of the States Signatory to the Compact who 
had previously been elected to the Prison Labor Authority were re- 
tained on the Authority with Mr. Thorsten Sellin and Mr. Thomas Rickert, 
the President's representatives of consumer and labor respectively. 

On December 10, 1934. in Washington, B. C, the Association of 
States Signatory to the Compact re-elected the same six members to 
represent the States Signatory to the Compact and these same officers 
were selected to carry on for the ensuing year. 

(*) Memorandum of March 22, 1935 to Linton M. Collins from 
V. J. Clarke, Prison Labor Minutes File. 

(**) Minutes of Prison Labor Authority Meeting, May 1, 1934, 
Prison Labor Minutes File. 

9742 



-24- 

IV. EFFORTS OF PRISON LABOR AUTHORITY ON ALLOCATION AND DIVERSIFICATION. 

From the time the Prison Labor Authority was properly established 
continuous efforts were made by that Authority through its Secretary 
and Treasurer, Mr. James V. 3ennett, its Economic Adviser, 
Mr. Howard B. Gill, and the National Recovery Administration, to 
encourage the allocation and diversification of nrison made products 
and to prohibit the expansion of prison industries whose products 
entered the public market in proportions unfair to competing private 
industry. Under Article VII, Section 2 (f) of the Compact, it was not 
only an objective of the National Recovery Administration but also 
of those signatory to the Compact to see that prison good9 did not 
bear a disproportionate share of competition in the public market. 
Moreover, in January, 1934, the Hawes-Cooper Act went into effect, (*) 
and presumably resulted in some curtailment of prison production of 
goods to be sold on the open market. 

V. PRISON LABOR AUTHORITY REQUIREMENT OF LABELS ON ALL PRISON GOODS 
IN COMPETITION WITH FREE INDUSTRY GOODS REQUIRING LABELS. 

At the meeting of the Prison Labor Authority on October 16, 1934, 
it was voted that: 

"In all industry reauiring the N.~.A. label attached to 
products, the Compact label shall be attached to a similar 
product made in prison industries, and any failure to 

attach the Compact label to such products will be regarded 
as a violation of the Compact. In case of such violation 
the Secretary is instructed to notify the Commissioner of 
Correction, Board of Control or other public agency having 
charge of the prison industries, and if that. does not prove 
effective to report the matter to tie N.R.A., with the re- 
quest that the President take the matter up directly with 
the Governor of the State involved." (**) 

Thus a policy was established regarding the use of N.R.A. Compact 
labels by action of the Prison Labor Authority. 

VI. ACTION OF PRISON LABOR AUTHORITY ESTABLISHING PRICE POLICY UNDER 
. ARTICLE V,- SECTIONS (a) and (b) AND ARTICLE VII, SECTION 2 (d), 

OF THE COMPACT. 

At the meeting of the Prison Labor Authority in Washington, D. C, 
on October 16, 1934, the Economic Adviser presented the following 
recommendations as a price policy: 



(*) Hawes-Cooper Act, 45 Stat, at large 1084, 48 U.D.C.A. 65. 

(**) Minutes of Prison Labor Authority Meeting dated October 10, 1934, 
Prison Labor Minutes File. 



9742 



•25- 



"As provided under the Comorct, .article V, Sections A and 3, 
any prison industry shall be authorize bemporarily to meet 
the urices of representative firms in competing areas on 
comparable products, provided notice and evidence of such 
prices is filed with the Prison Labor .authority bv such 
prison industries pending investigation and report h< r the 
Code Authority As provided in Article VII, Section 2 (d) 
of the Compact, notice of such authorizations shall he sent 
to the Code Authority affected with the reouest for a report 
as to whether the representative firms cited are operating 
properM r unaer the code; if so, the authorizations shall be- 
come permanent pending a change in urices, but if the firms 
cited are not operating properly under the Code and the Code 
Authority takes ste-os to rectify the situation, the Prison 
Labor Authority shall notifjr the prison industries to conform 
to a fair current or Ice to be 6.er,srmined. In applving this 
polic]- to -orison industries oat ^;- J ,ing under the contract 
system, the contractor shell be ^eaairded a e ti*e manufacturer 
and the cost of products received by him from the -orison in- 
cluding cost of manufacturing overhead, material, and labor 
in addition to the cost of prison labor shall eoual the 
minimum urice allowable to the manufacturer. " 

"On motion made by Mr. Steooins of Michigan anc seconded 
lij Mr. Hannan of "Wisconsin, it was T TOted. that the orice policy 
as recommended is hereb-- auaroved; and the Secretary and the 
Economic Advisor are hereby instructed to check carefully any 
contracts for the looor of 'prisoners opera-tin^- under this 
policv to be sure that suca contract s, insure a. return from 
tne contractor to the State or its politics! sub-division 
and/or the prisoner of an amount ea.'l in value to the cost 
per unit of prod.uot ^or labor and overhead necessarily oaid 
in competing domestic priv te industry on the comparable uro- 
duct, as provided in Section 7 of t le Compact". (*) 

VII. ACTIOS OP PFJSOH LIBOR AUTHORITY OS ASSESS! EFTS. 

At the meeting of tne Prison Labor n.athorit: r on May 10, 1935, in 
Washington, the following resolution was voted regarding assessments: 

"That no assessments on cotton garments sold by prisons 
previous to May 1, 1S34, shall be made on account of the 
Prison Labor Authority; that all prison-made cotton garments 
sold, after Hay 1, 1934, shall be subject to the regular as- 
sessment, and. that any assessments collected, on products 
sold before May 1, 1934, snail oe refunded." 

It was further voted, that the assessments mace r-r the Prison -^abor 
Authority should conform to the assessments made under private codes in 
the correspond in.' industr - -. Thus trie Prison Labor Authority attempted 
to maintain its assessment upon prison industry products at the same 
rate which corresponding free industry code authorities assessed their 

respective industries. 

(*) Minutes of Meeting of Prison Labor Authority, October 16, 1934, 

Prison Labor Minutes Tile. 
9742 



-26- 



VIII. PRISON LABOR AUTHORITY VOTE TO BRING JAILS AND HOUSES OR CORRECTION 
OF MINOR POLITICAL SUBDIVISIONS '7110 3ECAME SIGNATORY TO COiPACT 
UNDER THEIR JURISDICTION. 

On Hay 10, 1935, the Prison Labor Authority voted: 

"That jails and houses of Correction who sign the. Compact 
of Pair Competition for the Prison Industries of the United 
States of. America, shall he accepted as coming under the 
jurisdiction of the Prison Labor Authority." 

This action was taken by the Authority with full knowledge that it 
might involve some difficult"' in determining the legal status of action 
of this type. However, as the Compact of Fair Competition was regarded 
rs a voluntary agreement by the States Signatory thereto, the above 
action was taken with the understanding that if any House of Correction 
or Penal Institution of a minor political subdivision wished to become 
signatory to the Compact it could do so on a purely voluntary basis. As 
the Supreme Court decision affecting the N.R.A. r 'as rendered on Hay 27, 
1935, no effort v?as made to encourage tiie "Jails and Houses of Correction" 
supported by minor political subdivisions of a state to become signatory 
to the Prison Compact. 

IX. THE ASSOCIATION OR STATES SIGNATORY TO. THE COiPACT VI TS TO CONTINUE 
THE .PRISON LABOR AUTHORITY AFTER SUPREME COURT DECISION 111 SCHECHTER 
CASS. 

At a meeting of the Association of States Signatory to the Compact 
held in Rashington, on June 24, 1935, the following action was taken 
with reference to the continuance of the Prison Labor Authority: 

"On motion ms.de by Dr. McClintic and seconded by Mr. 
Hunter, it was voted that the Association of States Signatory 
authorize the Prison Labor Authority to continue to function 
as an Agency created by order of the President at the request 
of the Association of States Signatory to carry out the provi- 
sions of the Compact of Fair Competition for the Prison In- 
dustries of the United States of America; that a_rr r amendments 
to the Compact made necessary by the Act of June 15, 1935, ex- 
tending and amending the National Recovery Act approved June 
IS, 1933, shall be submitted to the next meeting of the Author- 
ity by a Committee consisting of Thorsten Sellin, E. L. Pardue, 
John J. Hannan; and that the Secretary and the Economic Advisor 
are authorized to cooperate with the NRA and, especially with 
the Division of Business Cooperation and with trade associations 
or other industrial and commercial groups to effectuate the pro- 
visions of the Compact. 

"On motion made bv Mr. Pardue and seconded by Mr. Norton, 
it was voted that the resolution just passed shoxilc. be sub- 
mitted to all of the States Signator 1 ' with the request that if 
they were not represented at the meeting of June 24th, they 
indicate their vote." 

9742 



-27- 



CHAPT 5R IY 

LATHIS A1TD IHSIGHIA 

I. APPLICATION FOE US3 OF U.K. A. LAB3LS 3Y TEE PHI SOU LABOH 
AUTHORITY, 

In a letter on April 17, 1934, to General Johnson, from 
James V. Bennett, .Secretary-Treasurer of the Association of States 
Signatory to the Compacts a formal application was made for the 
issuance of a N„H.A. label for use on cotton garments manufactured 
under the terms of the Prison Industries Compact. This letter 
(a) and a draft of proposed riles !.b), governing the issuance 
of such labels, are in substance quoted as follows: 

"(a) It' is respectfully requested that you app- 
rove the issuance for a period of not more than 
three months of an EPA identification symbol for 
use in cotton garments manufactured' under the 
terms of the Prison Industries Compact of Pair 
Competition, approved by you on December 9, 1933. 
Illustration of several proposed types of symbols 
is enclosed. We prefer type Ho. 3. There is also 
enclosed a tentative draft of a rule governing 
the issuance of these labels. 

"We request this authority pending a decision 
by you on the propriety of requiring the Cotton 
Garment Code Authority to permit use of their 
labels on gaiments manufactured under the terms 
of the Prison Industries Compact of F-air Compe- 
tition, or pending your approval of the issuance 
of a rule by the Prison Labor Authority requiring 
all manufacturers operating under the terms of 
the Prison labor Co;.T^act to pla ce an II. P. A. label 
upon their products. 

"Since the labeling provisions of the Cotton 
Garment Code become effective as of fey 1, 1934, 
and as the Retail Code prohibits any retailer 
from purchasing or selling any such merchandise 
not bearing a label it is obvious that goods 
made under our compact cannot be handled by 
retailers after that date despj to the fact that 
another provision of the Petail Code would "oer- 
mit their sale, unless the situation is remedied 
immediately. 

"We request this dispensation because of 
the emex'gent nature of existing situations. As 
soon as the representatives of the President, are 
appointed to the Prison Labor Authority we will 



9742 



-28- 



perfcct and file with you an appeal for the use 
of the label of the Cotton Garment Code Authority 
or request your approval of a rule of our Asso- 
ciation requiring the use of a label on goods 
made under the terms of our compact. 

"Some solution of this question is essential 
or the prison labor Compact will be discarded and 
former conditions of uncontrolled competition by 
state institutional industries will follow." 

"(b) Pursuant to a motion adopted at a meeting 
of the Prison labor Authority, held in the City 
of Washington on April 13, 1934, and by virtue of 
the authority vested in the Prison labor Authority 
by subsection (g) of Section 2, Article VII, of .. 
the Ppison Labor Compact of Fair Competition, 
approved by the National Recovery Administration 
on December 9, 1933, and 

"Pursuant to the requirements of Section 2 
and 3 of Article IX of the Code of Fair Competi- 
tion for the Retail Code, the following rules 
and regulation's effective as of May 1, 1934, are 
hereby promulgated for the guidance of all 
concerned: 

11 (l) All goods, wares or merchandise made 
in state institutions or subdivisions thereof, 
adhering to the Prison Labor Compact of Fair 
Competition shall bear an N.R.A. Identification Symbol 
whenever similar goods made by industries adhering to 
codes of Fair Competition are required to bear an 
N.R.A. label. Zlach symbol shg.ll bear a serial 
registration number especially assigned to each 
state or political subdivision thereof by the Prison 
Labor Authority in such manner and form as they may 
determine, with the approval of the Administrator, 
and which shall be attached to the product sold, 
shipped or distributed by any signatory to the 
Compact. Any and all signatories to the Compact 
may apply to the Compact Authority for a permit 
to use such II. R. A. symbol, which permit shall be 
granted only when the application for use thereof 
shall be accompanied by a certificate of compli- 
ance with the Compact signed by the applicant 
therefor in such manner and form as shall be deter- 
mined by the Prison Labor Authority by and with 
the approval of the Administrator, and which permit 
to use the symbol shall continue in fcrce if and so 
long as the one to whom the permit is issued shall 
comply with the Compact and the regulations set up 



9742 



and approved by the Administrator. 

"(2) The Prison Labor Authority, subject to 
approval "by the Administrator, shall establish rules 
and regulations and appropriate machinery; (a) for 
the issuance of said identification symbols; (b) 
for the inspection, examination, and supervision 
of the practices of states using such symbols; (c) 
for the purpose of ascertaining the right of said^ 
signatory to their continued use; (d) for protecting 
purchasers in relying on said symbols; and (e). for 
the purpose of insuring to each state and to' in- 
dividual private employers that the integrity of 
the symbolism will be maintained by virtue of 
compliance with the practices contained in the 
prison industries compact of fair competition. 

"(3) The charge made by the Prison Labor Com- 
pact Authority for such identification symbols shall 
at all tines be subject to supervision and orders of 
the Administrator and shall "be not more than an amount 
necessary to cover their actual reasonable cost, 
including printing, distribution, and administration 
and supervision of the use thereof as hereinbefore 
set forth. 

"(4) Whenever satisfactory arrangements can 
be made with any code authority having power to use 
and distribute II. P. A. labels to the members of their 
industry, the Prison Labor Compact Authority may 
procuro such labels and issue them to such signa- 
tories of the Prison Labor Compact Authority as 
comply with their orders, rules and regulations." (*) 

Prior to the receipt of this letter by the N.R.A., the 
Prison Labor Authority and the Cotton Garment Code Authority held 
informal conferences regarding the use of the Cotton Garment Code 
Authority label on prison-made cotton garments. It was the opinion 
of Mr. Sydney P. Prince, Jr., Assistant Counsel of H.R.A.. that the 
Prison Labor Authority would be unsuccessful in its attempt to 
use the same label as adopted by private industry. At a joint 
conference of these two groups on April 13, 1934, the Cotton Gar- 
ment Code Authority unalterably opposed the use of its label on 
prison-made cotton garments. At this conference, the Cotton Gar- 
ment Code Authority stated that it would not object to the use by 
prison labor industries of a distinctive label, providing the 
label clearly identified the issuing authority. However, Mr. 



(*) Prison Labor - Insignia and Labels Pile of Former Public 
Agencies Division of iJ.R.A. 



9742 



Sidney Hillman, M,©"iber of the Labor Advisory Board, expressed 
his opposition to the use of any goods made by prison labor. (*) 

It became necessary for the prison industries operating 
under the Compact to use labels on prison-made products manu- 
factured for sale in the public market. This requirement was 
necessary because of Article IX, Section 2 of the Retail Code 
which read as follows: 

"N.R.A. Label: — No retailer shall purchase 
sell, or exchange any merchandise manufactured 
under a Code of Fair Competition which requires 
such merchandise to bear a N.R.A. label, unless 
said merchandise bears such label. Any retailer 
rightfully possessing the insignia of the N.R.A. 
who has in stool: or purchases such merchandise 
which lias been manufactured before the effective 
date of the Code of Fair Cormetition requiring 
such merchandise to bear a N.R.A. label may 
attach thereto the II. R. A. insignia." 

However, in a memorandum dated April 24, 1934, from 
Assistant Counsel Sydney E. Prince, Jr., to Acting Division 
Administrator, Linton l.i. Collins, Division 8, the following 
conclusion was reached: 

"That so far as the product completely made 
by a state or its institx\tions is concerned no 
label is necessary under the Retail Code. Goods 
made by a private manufacturer using prison labor, 
however, may not be sold under the Retail Trade 
Code if they do not bear either the label of 
the Code covering their manufacture or a sub- 
stitute for such label." 



Therefore, it became necessary for the Prison Labor 
Authority to have a label so that prison contractors using 
prison labor in the manufacture of cotton garments might 
secure an outlet for their products through the regular chan- 
nels of trade and eventually be sold under the Retail Code. 

II. LFGAL DIVISI01I MEMORANDUM STATING TIE ADMINISTRATOR MAY 
AUTHORIZE THS-US3 OF N.R.A. LABELS ON PRISON MADE GOODS. 

Under date of April 21, 1934, the Legal Division through a 



(*) Memorandum, April 14, 1934, from Sydney R. Prince, Jr., 
Assistant Counsel, to Mr. C. G. Rap heal, Insignia and 
labels, Prison Labor Files. 

9742 



-31- 



memorandum to Acting Division Administrator, Linton M. Collins, 
clarifies the question of the Administrator's power to authorize 
the use of N.R.A. labels on prison-made goods. The part of the 
memorandum which covers this point is as follows: 

"U e are of the opinion that the question of 
the Administrator's power to authorize the use of 
N.R.A. insignia, namely, the Blue Eagle, upon 
prison-made products, is now settled. Adminis- 
trative Order Ho. X-9, relating to 'sheltered 
work-shops', provides as follows: 

"Any sheltered work-shop who signs 
and complies with such a pledge, shall 
while so complying, be entitled to use 
any appropriate insignia of the National 
Recovery Administration." 

"The question of the Administrator's power 
to allow the use of the N.R.A. insignia upon pro- 
ducts not manufactured under a Code is settled 
in this Order. The use of the N.R.A. insignia 
by sheltered work-shops is conditional upon their 
compliance with certain conditions designed to 
promote fair competition. The prisons operating 
under the Prison Labor Compact also agreed to 
conditions which tend to promote fair competition." 

III. MEMORANDUM OF ACTING DIVISION ADMINISTRATOR TO ADMINISTRATIVE 
OFFICER RECOMMENDING N.R.A. LABELS 33 AUTHORIZED FOR USE ON 
PRISON MADS GOODS. 

The memorandum of the Acting Division Administrator to the 
Administrative Officer of April 23, 1934, in part reads as 
follows: 

"Accordingly I recommend that a label which 
may be described as follows should be authorized: 

'The Blue Eagle with the letters 
N.R.A. without the word 'member' with 
the words 'We Do Our Part'; followed by 
the words 'P.L. Registration No. '." 

IV. MEMORANDUM OF POLICY ADVISERS ON QUESTION OF WHETHER GOODS 

MANUFACTURED UNDER THE COMPACT SHOULD BEAR N.R.A. LABELS. 

On April 26, 1934, the Policy Advisers met to discuss the ques- 
tion of "whether goods manufactured under the Prison Labor Compact 
should bear a label." The following was the opinion of the group: 



9742 



-32 



"(l) All agreed that orison ^oods should hear 
a lahel. 

"(,'5) All concurred that the lahels should he 
distinctive. 

"(3) The question then arose as to how distinctive _ 
these lahels -should he. The advisor/ group 
then divided in the following manner on 
whether or not the letters "P.L.C. License 
Number" should he on the lahel: 

Mr. Barkin (Labor) 

Mr. Bishop (Research and Planning) 

definitely were for putting "P.L.C. License 
Humher" on the label. 

Mr. Humley (industrial) 

Mr. Young (Trade Association) 

Mr. Geor fa e (Compliance) 

were for leaving off the "P.L.C." and merely- 
putting on the License number. 

■ M r . Mahoney (Legal) 
Dr. Homan (Counsel) 

favored including "P.L.C." on the label, but 
ste.ted that if the Prison Labor Compact Code 
Authority would not accept the "P.L.C." they 
be given an emblem of just a license number 
for the trial period, pending the hearing to 
determine exactly what lahel the to oods 
should bear. " 

George S. Brady, Deputy Assistant Administrator for Policy 
also favored marking the label with the initials "P.L.C." to 
distinguish the O oods of prison labor, but stated that in view of 
the background of the situation he thought it inadvisable at this 
time to impose this restriction upon the adherents to the Compact. 
After consultation with Mr. Harriman, Divisional Administrator, he 
found that Mr. Harriman agreed with him on this point. It was, 
therefore, agreed that the recommendation should go forward to per- 
mit the use of the insignia without a "P.L.C." designation, and 
that it be suggested to the Administrator of the Prison Compact 
that this matter be reviewed again if it were later shown that 
prison-made goods had any unfair advantages over free labor goods in 
the open market. (*) 

(*) Memorandum of Meeting of Policy Advisors -.Legal Division, Prison 
Labor - Labels and Insignia Pile. 

9742 



-33- 

V. POLICY DECISION RULING THAT PRISOil MANUFACTURED PRODUCTS UNDER 
THE COMPACT MAY BEAR Ail N.R.A. LABEL. ■ ■ 

Under date of A"oril 27, 1934, Policy Decision 6 was signed 
by Administrative Officer, G. A. Lynch, by direction of the Adminis- 
trator, after recommended atnroval by George S. 3rady, Deputy 
Assistant Administrator for Policy. This Policy Decision reads as 
follows: 

"It is ruled that products manufactured 
under the Compact of Fair Competition for the 
Prison Industries may bear N.R.A. Insignia, 
but not the word 'member'. The insignia or 
label must be distinctive and must not bear 
the Code insignia. It must bear the number 
of the license under which it is issued." (*) 

VI. ADMINISTRATIVE ORDFR 1T0 V-2 SETTING FORTE REGULATIONS GOVERNING 
THE USD OF H.R.A. IDENTIFICATION SYMBOLS. - 

On May 3, 1934, Administrative Order Ho. V-2 $*) was signed 
by the Administrator for Industrial Recovery. This Order author- 
ized and empowered the Prison Labor Authority to issue an N.R.A. 
Identification Symbol using the Blue Eagle. This Order approved 
certain regulations, particularly describin the N.R.A. Identifi- 
cation Symbol and governing the use of the Symbol by prisons comply- 
ing with the Compact of Fair Competition of the Prison Industries 
of the United States of America. 

As a result of this action the National Recovery Administration 
received letters and telegrams of proteat. The most important being 
a telegram from R. L. Paddock, Executive Director of the Cotton Gar- 
ment Code Authority on May 12, 1934. This telegram reads as follows: 

"Cotton Garment Code Authority strongly urges 
you hold up -action on prison labels Stop We are 
largest users of HRA labels Stop This matter handled 
without so much as notice to interested -Code Author- 
ities Stop 77e believe open Public Hearing should 
be held permitting views of affected 'industries 
consideration which up to now has been denied." £*9 



(*) Policy Decision 6 and N.R.A. Release No. 6069. 

(**) Administrative Order No. V-2, Vol. IX, Page 731, Printed 
Code. 

(***) Labels - Insignia, Prison Labor, Legal Division Files. 



9742 



-34- 



A 3 a result of this objection and an application to stay 
Administrative Order No, V-2, filed by the Cotton Garment Code 
Authority, the Administration decided to hold a Public Hearing on 
the question of whether the Prison Labor Authority should be entitled 
to use N.R.A. Insignia, including the Blue nagle and whether a stay 
of Administrative Order No. V-2, as applied for by the Cctton Gar- 
ment Code Authority, should be granted or denied. (*) 

National Recovery Administration Notice of Hearing No. 643 
of May 15, 1934, was then issued in oraer that a public hearing 
on the application for the stay of Administrative Order No. V-2, 
could be" held on May 28, 1934, in Washington, D. C. (**) 

Pursuant to this notice the Public Hearing was held, at which 
time representatives of free industry (including the Cotton Garment 
interests) and the prison people presented their arguments publicly 
concerning the use of N.R.A. labels by the prisons on prison made 
goods. The position taken by all of the interested. parties, in- 
cluding labor, was discussed and a complete copy of these arguments 
may be found in the transcript cf the public hearing. (***) 

VII. ADMINISTRATIVE 0RD3R NO. V-3. 

After the Public Hearing was held pursuant to N.R.A. Notice 
of Hearing No. 643, the Acting Division Administrator in charge of 
the Compact received reports from the Labor, Consumers and Industrial 
Advisory Boards, as well as from the Research and Planning and Legal 
Divisions of N.R.A. All of these reports favored the granting of an 
N.R.A. Insignia on prison goods made under the provisions of the 
Compact, ?dth the exception of the one from the Labor Advisory Board. 
This Board went on record as being opposed to the use of the N.R.A. 
label on any goods manufactured by orison labor, unless such goods 
were definitely marked "Prison-Made". (****) 

After careful consideration by the Acting Deputy Administrator 
of the Testimony and evidence entered in the record at the Public 
Hearing (Transcript of Hearing on Administrative Order No. V-2) and 
the reports of the N.R.A. Advisory Boards, the Administrator for 
Industrial Recovery approved Administrative Order No. V-3 modifying 
Administrative Order No. V-2, and the regulations approved by that 
Order, but denied the stay of the Order as requested oy the Cotton 
Garment Code Authority. The modification of the regulations of 
Administrative Order No. V-2, as approved in Administrative Order 



(*) Hearings Pile, Prison Labor, Former Public Agencies Division, 

N.R.A. 
(**) N.R.A. Release No. 308, May 16, 1934. 
(***) Transcript of Hearing on Administrative Order No. V-2, Prison 

Labor Filfcs, Division 8, N.R.A. 
(****) Administrative Order No. V-3, Reports of Advisory Boards, 

Orders File on Prison Labor, Division 8, N.R.A. 

9742 



-35- 
lTo . V-3, ordered: 

"1j That the fourth paragraph of the regula- 
tions heretofore approved on May 3, 1934, 
in Administrative Order No. V-2 is struck 
out and the following paragraph is substi- 
tuted therefor: 

"(4) The 1T.R.A. Identification 

Symbol authorized by these regu- 
lations shall be the N.R.A. Insig- 
nia heretofore issued to employers 
under the President's Reemployment 
Agreement, except that the word 
•member' which appears under the 
letters 1T.R.A. , shall be omitted. 
Below the words lie Do Our Part ■ 
there shall be placed letters 
and words in legible print 'Com- 
.pact 1 , Indent. Ho. 1 - .■"' 

•&. xxib above described Insigr 

all labels hereafter issued but in no way 
affect those heretofore issued prior to 
this date. 

"3. The Application for Stay filed by the Cotton 
Garment Code Authority is hereby denied." (*) 

VIII. BUDG3T AiTD AUDIT OP PRISON LABOR AUTHORITY. 

After the Prison Labor Authority was duly organized on May 1, 
1934, the Association of States Signatory to the Compact loaned 
this Authority $500 with which to start operation and defray 
current expenses until such time as the Authority could collect 
money from the sale of labels and assessments. This loan was 
repaid to the Association on May 30, 1935. (**) A proposed annual 
budget for the year May 1, 1934, to April 30, 1935, amounting to 
$25,000 was voted by the Prison Labor Authority at its meeting 
of October 16, 1934. (***) At this meeting the Prison Labor 



(*) Administrative Order Ho. V-3, Code Record Section, N.R.A. 
and Orders filed Prison Labor Compact File. 

(**) Piles of the Prison Labor Authority. 

(***) Page 11 of Prison Labor Authority Budget and Minutes of 
the Prison Labor Authority Meeting Of October 16, 1934. 
Prison Labor Budget File. 



9742 



■ 36- 



Authority approved the following plan of assessments and accounting 
for the proper conduct of its "business: 

"The following rules and regulations shall govern 
the assessment of all contributions to the 
Prison Labor Authority to defray the attached 
"budget for the Period May 1, 1934 until 
April 30, 1035. 

"1. Each penal institution or prison industry 
in a State Signatory to the Compact or which 
otherwise signified its intention to comply 
with the terms of the Compact as required, 
shall "be subject to an assessment ' to defray 
the expenses of maintaining the Prison Labor 
Authority. 

"2. Such assessment or contribution shall be 
voluntary. 

"3. Payments shall be made quarterly on June 15, 
October 15, January 15, and April 15. The first 
payment shall be based on the amount of all pro- 
ducts sold or other units used as a basis for 
assessment during the period January 1 to Septem- 
ber 30, 1934, and shall be payable at once. Thereafter 
assessments shall be due and payable on the following 
dates: January 15, 1935 and April 15, 1935. 

"4. Payments shall be made to the Secretary of the 
PIA who shall be bonded for the faithful perfor- 
mance of his duties. The Secretary shall keep or 
cause to be kept a separate bank account of all 
funds received by the PIA. He shall maintain an 
adequate book-keeping system of all receipts, 
including assessments levied, collected and 'un- 
collected and expenditures, including accounts 
payable and other commitments, together with 
proper vouchers therefor. Ke shall be authorized 
to enter deposits for and draw checks against 
the PIA on the presentation of vouchers, such 
bills to be approved and checks to be signed 
jointly by a vice-chairman and the secretary to 
the PIA. 

"5. A quarterly audit shall be made by an 
accredited accountant and his report presented 
at each quarterly meeting of the PLA in 
December, March, June and September, and filed 
with the NPA as required. 



9742 



-37- 

"6. Assessments shall be made "by industries, and the 
rate of assessment shall he as nearly as practicable the 
same as that approved by or submitted to the NBA for the 
corresponding private 'industries. All assessme-nts shall 
be levied against prison products sold and delivered on the 
open market. A minimum assessment of $25 shall be made on 
any industry; but if any member of the industry subject to 
this assessment justly complains that this is an undue burden, 
the PLA will adjust the matter, subject to the disapproval, 
if any, of the N.R.A. " 

"The following shall be established as the rates of assess- 
ment in the industries named: 

*Binder Twine - $.0001 per lb. 

Brooms - $.015 per doz. for household and domestic brooms. 
$.005 per doz. for toy and whisk brooms. 

Brick - $.06 per l.i for common brick. 
$.10 per U for face brick. 

Canned Products - $.001 per case. 

Coal - $.005 per ton. 

Clay Products - l/2$ on total sales. 

Cotton Garments - $1.00 per M for underwear; $1.5C per M 

for work shirts; 

$2.00 per IvI for work pants, overalls, 
coats, and other garments. 

* Cotton Textiles - $.015 per active spindle annually. 
Crushed Stone, Sand and Grave - $.05 per 1*1 tons. 

* Farm. ."Equipment - l/lOjS on total sales. Binders $.10 

each, mowers $.035, dump rakes $.02 
side delivery rakes $.04, hay loaders 
$.04, cultivators $.035. 

Furniture - l/2$ on total sales. 

Hosiery - 1/10$ on total sales. 

Hollow-ware - l/lCp on total sales. 

Ice - $.006 per ton. 

Leather Goods - l/Sfb on total sales 

Rock TTool - l/2^ en total sales. 

Saddlery - 3/20$ on total sales. 

Shoes - 3/100^ on total sales. 



-38- 

"As "bases for assessment for other code authorities in which, . 
similar industries are carried oh in prisons'are submitted' or "ap- 
proved "by the NRA, such rates shall also apply to corresponding pri- 
son industries." 

" * No official rate approved by or submitted to KRA, but rate 
adopted after consultation with prison industry involved." (*) 

The following is the amount of income estimated -under the budget 
from May 1, 1934 to April 30, 1935. 

"Estimated Income - Hay 1 1934 -.April 30, 1935. 

Sales of Cotton Garments and Underwear Labels . . . $15,000. 

4313 i.-I work pants <u $2 per II. 

1720 M work shirts @ $1.50 per M. 

3797 H Underwear @ $1.00 per M. ' 
Assessment on Sale of Binder Twine 

35,000,000 lbs ki $.0001 per lb 3,500. 

Assessment on Sale of Farm Equipment 

$1,175,000 v* $.001. ' 1,175. 

Assessment on Sale of Cotton Textiles 

22,144 spindles fc» $.015 per active spindle. . . . 325 
Assessment on Other Industries 

Basis of contribution same as in 'Private Industr y 5.000. 

TOTAL ESTIMATED INCOME. $25,000." 

During the time the Prison Labor Authority was actively functioning 
under the National Recovery Administration, that Authority filed with the 
KM audit reports containing balance sheets and income and expense statements 
covering the following periods: 

1. June 1, 1934 to August 31, 1934 

2. June 1, 1934 to November 30, 1934. 

3. May 1, 1934 to February 28, 1935. 

and an annual audit report for the fiscal year which ended April 30, 1935. 
The first three of these audit reports were made "oy Mr. F. D. LaVallee, an 
employee of the Bureau of Federal Prisons, while a fourth and annual audit 
report was made by the firm of Councilor & Buchanan, certified Public 
Accountants of Washington, D. C, and New York. 

The following is a statement of the cash receipts and disbursements 
of the Prison Labor Authority for the fiscal year ending April 30, 1935. 

(*) Appendix to Prison Labor Budget as proposed at October 16, 1934 
Meeting of Prison Labor Authority. 



9742 



-39- 

" PRISON LABOR AUTHORITY 
T.'ASHIHG-TOU. D. . 
CASH RECEIPTS AIT3 DISBURSEMENTS 
FOR THE FISCAL YEAR EiIDED APRIL 30, 1955. 



RECEIPTS: 



From Sales on Labels 








$7,013.97 


Advance Payments on Sales 


of 


Labels 




146.37 


Assessment of Members: 










Binder Twine 






$3,800.99 




Cotton Yardage 






251,50 




Sundry Garments 






774.68 




Brick 






6.91 




Brooms 


* 




168.31 




Farm Implements and Machinery 


530.91 




Foundry 


• 




170.00 




Furniture 






106.80 




Harness 






153.55 




Hosiery 






170.00 




Coal 






340.00 




Shoes 






37.09 




Quarry 






.34 


6.521.08 


Total Receiots 








$13,681.42 



DISBURSEMENTS : 

Salaries: 

Chief Executive Officer 
Stenographic and Clerical 

Travel 

Rent 

Telephone and Telegraph 

Statir ery and Supplies 

Post?.;: 

Printing and Mineographing 

Auditing 

Furniture and Fixtures 

Miscellaneous 

Labels - Printing cost 

Labels - Shipping Cost 

Total Disbursements 

BALANCE - APRIL 30. 1935: 

On Deposit in Bank 
■Petty Cash Fund 



$5,250.00 
1,586.51 



$6,836.61 

1,133.16 

420.00 

356.75 

174.36 

128.52 

166.65 

90; 00 

40.66 

28.48 

1,612.39 

63.32 



$11,050.90 



$2,627.90 
2.62 



$2.630.52 



This same accounting firm made another audit report of the Prison 
Labor Authority's activities for the period May 1, 1935. Below is their 
statement of receipts and disbursements for this period which is the last 
received by the ERA. 
9742 



-40- 

" PRISON LABOR AUTHORITY 
WASHINGTON, D. C. 

STATEMENT OF INCOME AND EXPENSE 



FOR THE PERIOD MAY 1, 


1935 TO JUNE 


! 15, 


1935" 


INCOME: 








Sales on Labels 


$685.00 






Less Cost of Sales - Printing 


244.00 






(Jross Profit on Labels 




$ : 


441 . 00 


Assessments Received: • 








On Sales on Sundery -Garments 


$953.98 






On Sales of Harness 


442.60 






On Sales of Whips 


55.54 






On Sales of Metal Wire Goods 


10.00 






Total Assessments Received 




$1, 


,462.22 


Total Income 






$1,903.22 


EXPENSE: 








Salaries: 








Chief Executive Office 


$750.00 






Stenographic and Clerical 


335.00 


1, 


,085.00 


Office: 








Rent 


$ 56.25 






Telephone and Telegraph 


84.87 






Stationery and Supplies 


33.92 






Postage 


4.96 






Printing and aineographing 


27.20 






Miscellaneous 


1.60 


$ 


208.80 



General: 

Travel - Members of Code Authority$205.69 
Travel - Chief Executive Officer 173.79 
Postage and Labels 5.43 384.91 

Total Expense $1,678.71 

NET INCOME $ 224.51 ( *) 



(*) Audit Rerjorts of Prison Labor Authority, Prison Labor Budget Pile. 



9742 



-41- 

The Supreme Court decision of May 27, 1935 affecting N.R.A., had a 
far reaching effect on the activities conducted under the Prison Labor 
Compact. The Prison Labor Authority ceased the issuance of labels and 
the collection of assessments from the state prisons and the result was 
that the Prison Labor Authority had no means of financing itself except 
through voluntary contributions from the States. In view of the fact that 
the competing Code Authorities could not enforce their codes it then became 
unnecessary for the Prison Labor Authority to attempt to enforce the Compact. 

On November 6, 1934, Mr. Saul Nelson of the Research and Planning 
Division of NBA submitted a memorandum to Acting Division Administrator, 
Linton Collins, stating as follows: * ' " 

"A proposed budget and basis of contribution has been submitted 
by the Authority for the Prison Labor Compact in the sum of twenty- ' 
five thousand ($25,000.00) dollars for the fiscal year between May 1, 
1934 and April 30, 1935. 

"Assessments under the provisions of this budget are to be purely 
voluntary, consequently this budget will not be submitted for formal 
approval by the Administration and this memorandum is purely advisory 
in nature. 

"An analysis of this budget indicates that it has been very care- 
fully prepared and conforms meticulously with all the various require- 
ments of this Division, with reference to the approval of mandatory 
budgets. The totals seem reasonable, the items seem adequately explain- 
ed and the basis of contribution appears to be equitable. 

"In view of the voluntary nature of contributions under this bud- 
get, no further comment will be offered by this examiner." (*) 

Although the Compact was continually recognized as a voluntary agreement 
between the States Signatory thereto and the National Recovery Administration, 
Mr. Hiram S. Brown, Assistant to the Administrative Officer, submitted a letter 
to Mr. Howard B. Gill, Economic Adviser of the Prison Labor Authority on 
April 9, 1935, advising him of tentative .approval of the budget previously 
submitted by the Prison Labor Authority. This action was taken to conform 
with the requirements of Executive Order No. 6859 and in compliance with Ad- 
ministrative Order No. X-136. (**) 



( *) Prison Labor Budget File, Former Public Agencies Division. 
(**) See Vol. XXI -Page 633 Printed Code. 



9742 



-42- 
CHAPT ER V 
CQTJPLIAPCE 
I. FORM COlITAiri'.TC- IUSTBUC'TIOITS TO COLiPIAIPAlTTS . 

Shortly after the approval of Administrative Order Ho. V-2, the 
Legal Division of H.R.A. prepared instructions to complainants against 
unfair prison competition. (*) "These instructions were sent out 'Dp the 
II. R. A. to all Code Authorities. They were also furnished to anyone 
interested in effecting compliance of State Prisons signatory to the 
Compact. One of the provisions of the Compact j Article VII, Section 
2(g), gave the Prison Labor Authority as created under Article VII, 
Section 3 of the Compact, the power "to hear .and adjust complaints 
arising under this Compact made "by effected parties: provided, however, 
that at the time any'isuch complaint is made the complainant must agree 
to submit such facts and figures as may "be necessary to the deter- 
mination of the issued involved." 

The letter of instructions further states: 

"Any complainant who is covered by a Code, should for- 
ward to his Code Authority his complaint. Accompanying his 
complaint he should forward the facts and figures which sus- 
tain his complaint and which are necessary to the determin- 
ation of the, issues, or in the alternative he should indicate 
his willingness to appear before the Prison Labor Authority 
and present such facts and figures. The Code Authority should 
forward this complaint, together with any other complaints of 
the same nature, to the Prison Labor Authority, c/o J. V. 
Bennett, Tower Suilding, Washington, E. C. The Code Authority 
should then request that the complainant be granted a hearing 
before the Prison Labor Authority, The Code Authority may send 
such representative o.r representatives as it wishes to this 
hearing. (One copy of each complaint and of the supporting 
papers should be enclosed.) 

"It is also provided in the Compact that it shall be a 
power and duty of the Prison Labor Authority:- 

"To determine, after conferring with the Code 
Authority of the Industry affected and upon request of 
any person or. firm affected, the prices, charges and 
amounts provided for in Article V, Sections A and B 
hereof, such determination to be subject to appeal 
to the President of the United States." 
Article VII, part of Section 2(d) 

"The representative or representatives sent by the Code 
Authority to the hearing should be authorized by the Code Author- 
ity to express its view of the matter at the hearing. 



(*) Appendix Po. A 



974; 



-43- 

"In the Compact it is made the duty of the Prison Labor 
Authority to determine the fair current price which is to prevail 
in a given market when complaint is made* 

"The subscribing States have also agreed that prison 
Labor will not Do contracted to provide manufacturers for 
small return which would affect competing outside labor. 
This part of the agreement is contained in Article V, Section 
(b). If there is any complaint alleging the non-observance 
of this latter provision, the complainant should follow the 
same '"rocedure in submitting his complaint. 

"The various Code Authorities have 'been informed of 
their rights to co-operate in this matter. They also have a 
co-iy of these instructions and we feel sure that any well- 
founded complaint will receive careful consideration from 
the appropriate code authority." 

II. AUTHORIZATION 0~ PRISON LABOR AUTHORITY TO NEAR AND ADJUST 
COMPLAINTS UTCTR ANTICLE VII, SECTION 2 (h) 0" ' TNT; COMPACT. 

The Compact made it a duty of the Prison L Dor Authority "to 
hear and adjust complaints arising under this Compact made by Prison 
Administrators or Prison -leads, and call J ;o the attention of the 
President any unfair trade practices designed to discriminate against 
prison-made goods or hamper objectives sought in the preamble of this 
Compact ." 

III. CERTIFICATE 07 COMPLIANCE AID APPLICATION "OR NRA LABELS. 

Following the ;r ; rival by the Administrator of Administrative 
Order No. V-2 , a Certificate of Cgm; liance and Application for NRA 
labels was prepared by the Legal '. ivision, and printed for distribution 
to the State prisons w.iich wore eligible to sign such Certific, te of 
Compliance. It will be noted that on the reverse side of this Certifi- 
cate was printed instructions covering the use of labels on prison made 
goods. The Certificate provided -as follows :;. 

Certificate of 

COMPLIANCE A11I APPLICATION NOR 

N.N.A. LABELS 

Under the Compact of Fair Competition for 
Prison Industries. 



"The undersigned lias read and understands the terms and 
conditions of the Compact of Fair Competition for Prison In- 
dustries, adopted and approved by the President on April 19, 
1934, and the instructions adopted by the Prison Labor Author' 
ity pursuant thereto appearing on the back hereof." 



9742 



-44- 

"The undersigned hereby certifies that he is comply- 
ing with ail the provisions of the Compact and with all the 
Regulations duly adopted - thereunder pursuant to the Compact, 
and nereby applies to the Prison Labor Authority for labels 
adopted by and issued by such authority by virtue of an order 
issued by the Administrator for Industrial Recovery, May 3, 
1934. 

"The undersigned further represents that if and when labels 
are issued to him, he will use such labels only on articles 
manufactured in compliance with the provisions of the Compact 
and only s: long as he continues to comply with all of the 
provisions of the Compact and any amendment thereto or any 
rules adopted thereunder for all the products which he manu- 
factures or sells. 

"The undersigned further rcprs&ent.s that all labels if 
and when issued to him shall be attached or sewn securely so 
that the full face of the insignia, shall be readily visible 
for inspection." 



ITame of Officer Authorized to Sign 



Title 



Approved by: 



Warden, Superintendent or State Officer Responsible 

Date •■' " 

The instructions jn the reverse side of the Certificate 
are as follows: 

INSTRUCTIONS 

Governing the Use of Labels on Prison Hade Goods 

"1. ill goods, wares or merchandise made in whole or 
in part, in the penal or corn etional institutions of any state 
which is adhering to the Compact of P n ir Competition for the 
Prison Industries of the United States of America, or made in 
such institutions of any political division of such states, 
will bear an N.R.A. Identification Symbol when offered for sale 
in the open nar'-ct. 

"2. The right to use the N.R.A. Identification Symbol ' 
or Label is granted to any prison industry only on compliance 

9742 



-45- 

with the provisions of the Compact and tho Regulations issued- ■ 
thereunder; and may be withdrawn for violating the' 1 compact or 
the regulations governing their use. 

"3, Permission to use labels on prison made products 
is granted to the Warden or Superintendent or o;;her responsible 
official of any prison, jail, house of correction, reformatory, 
or other correctional institution on application to the Psison 
Labor Authority. 

"4. Such amplications are to be made in writing on a 
form known as "Certificate of Compliance" and signed by the 
manager or the contractor or sub-contractor who operates such 
-orison industry and approved by the Warden, Superintendent, 
or other responsible official of the prison or correctional 
institution under whose authority the prison industry is con- 
ducted. 

"5. Orders for labels are to be made on forms approved 
by the prison Labor Authority and accompanied by a check or 
money-order in full payment of the scheduled charge for the 
labels. 

"6. Labels will be i'ssued only in such amounts as may 
be determined by the Prison Labor Authority, not exceeding 
two months' supply. The Authority, however, will issue, labels 
in excess of such amounts at special periods to meet seasonal 
or unusual demands. Any unused labels may bo promptly returned 
for credo. t to the Authority, 

"7. The Prison Labor Authority will cause to be made 
such investigation of the o] orations of applicants and their 
records as may be necessary to insure compliance with the 
terms of the Compact." 

IV. CODE AUTHORITY FIELD LETTER 110. 5. 

The Ih'.tional Recovery Administration on hay 26, 1934, issued 
a Field Letter to all Code Authorities titled "Rights of Code 
Authority to Co-o' .orate in Correcting Unfair Prison Competition." 
This letter was issued by direction of the Administrator and 
signed" by 0. A. Lynch, the Administrative Officer of N.R.A. In 
addition to general information concerning the compact, it also 
explained the "Handling by Code Authorities of the Complaints 
Against Unfair Prison Competition Arranging Basis of Competition." 
Another portion of the letter referred to "Securing Observance of 
the Compact" • 

The body of the letter read as follows: 

"A Copy of the agreement between twenty-nine states 
known as the Prison Labor Compact has been forwarded 
to all code authorities. The National Recovery Admin- 
istration is charged with certain duties with respect 
to this Compact and the several code authorities have 

9742 



-46- 
ccrtain valuable rights of cooperation under thjjg Compact* 

"Accompanying this you' will find a copy of 'Instructions 
to Complainants' Against Unfair Prison Competition 1 . A 
more detailed explanation of the nature and purposes of 
this Compact will "be found in the accompanying instructions. 

"Briefly it may be stated here that the Compact is intended 
t3 pror/iote fair competition on the oart of the prison in- 
dustries. The Compact was aoproved "by the President in an 
order dated April 19, 1934, The report of the Admir.istrator 
for Industrial Recovery to the President on this Compact 
gives a valuable resume of its nature and purposes. 

"In this Compact it is agreed by the Subscribing states 
that prison products sold by them will not be sold below 
the fair current price prevailing in the market in which 
the product is customarily sold. It is also agreed, that 
the prison contracting the labor of their prisoners will 
charge the manufacturer , per unit of the product, for the 
labor and overhead supplied, the amount necessarily paid 
by competing private industry. See Article V, Sections (A) 
and (B). 

"It is made the duty of the Prison Labor Authority, which 
was created under Article VII, Section 1, to hear and ad- 
just the complaints of affected' -oarties. Article VII, Section 
2 (g). 

"It is the duty of the' Prison Labor Authjrity, to determine 
after complaint is made, the fair prevailing market price 
with which prison products are to comply and also the fair 
charges for contract prison labor. Under this same article, 
the prison labor aiithority is required to confer with the 
code authority of the industry affected before making these 
determinations. Article VII, c ection 2 (d). 

Handling by Co de A uthorities of the 
Complaints Against Unfair Prison 
Com petition Arranging Basis 
of Competition 

"As you will note in the accompanying "Instructions to 
Complainants Against Unfair Prison Competition" all com- 
plainants are directed to send their complaints to their 
code authority. The code authority after making such 
study of the complaint and collecting such information as 
they deem necessary about the complaint ahonld forward it 
to the. Prison Labor Authority care of Mr. J. V, Bo --.::« 1 1 » 
Tower Building, Washington, D. C. For the convenience of 
everyone, the code authority should attempt to forward at 
the same time any other complaints from members of their 
industry concerning unfair prison corm/n tit\o$ If the com- 
plainant does not intend to appear personally or by re- 
presentative before the ^rison labor authority, he should 

9742 



submit in writing facts ard'figuros showing the tinfalrr 
competition with which he is faced. A copy of the com- 
plaint and any supporting papers should be forwarded at 
the same time. The code authority should request a 
hearing of the complaint 'by the Prison Labor Authority. 
The Code Authority may send a representative or repre- 
sentatives to the hearing. The representative should 
be authorized to crzpress the view of the code authority 
on the matters which will be determined by the Prison 
Labor Authority. 

"If the prison competition is of sufficient importance, 
a joint conference by the code authority and the Prison 
Labor Authority may "oc arranged upon request. 

"Under Article VII, Section 2, the acts and deter- 
minations of the Prison Labor Authority arc subject on 
appeal or review to disapproval or modification by the 
President, This power lias been delegated by the 
President. in the aforesaid Executive Order of April 
19 to the Administrator for Industrial Recovery. 

"No code authority may pass upon or adjudicate any 
matter pertaining to a contract between a -orison and 
a contractor or coming under the jurisdiction of the 
Prison Labor Authority but must submit any complaints 
or objections arising thereunder to the Prison Labor 
Authority. 

"The questions affecting this Compact will be referred 
to Division Eight in Washington, and correspondence 
should be addressed to Division Administrator Division 
Eight. 

Securing Observance of Compact _ 

"The several Code Authorities have certain valuable 
rights in securing and enforcing the observance of the 
Prison Labor Compact by the prisons of the subscribing 
states. The prevailing price and fair charge which are 
to be determined by the Prison Labor Authority, as 
mentioned above, must be observed by all of the prisons 
of every subscribing state. In case any prison violates 
the duly determined fair prevailing price or charge, the 
1T.E..A. insignia may be withdrawn. An IT.E.A. insignia for 
the use of the prisons of a subscribing State has been here- 
tofore authorized by Administrative Order. This insignia 
is issued to each prison of a subscribing state which 
signs a certificate of compliance. The Prison Labor 
Authority lias -the right to withdraw this insignia. If 
the insignia should be withdrawn from a particular prison, 
retailers would be forbidden by Article IX, Section 2 of 
the Betail Trade Code, from purchasing, selling, or ex- 
changing any merchandise thereafter manufactured by such 
prison, 

9742 



-48- 

"A complaint alleging the violation by a prison of 
a fair prevailing price or fair charge provision should 
Dc forwarded to the Prison Labor Authority through the 
Code Authority covering the particular Industry. The 
Prison L bor -authority will call a hearing on this cam- 
plaint. The Code Authority involved is entitled to 
representation at the hearing. The right to appeal to 
the national Industrial Recovery Administration upon a 
determination on a complaint of violation is full and 
complete under Article VII, Section 2." 

V. C0MPLAIITT3 

The collowing are a few of the major complaints received 
by the HEA-against prison products: 

Complaint of Steel Locker Industry against the Attica, 

Hew York Prison Claim that the bids on steel lockers 

by the prison was far below bids of free industry. 

This was referred to Dr. Walter I T . Thayer, Jr., 
member of the Prison Labor Authority in hew York state 
by the Administration and was investigated by him and 
copy of his investigation was sent to the Secretory, 
Steel Locker Industry. There was a. misunderstanding 
on the part of the Attica prison as to the number of 
openings in lockers and therefore their bid was lower 
than it should have been. 

Complaint received from the Label Review Officer of 
the Cotton Garment Code Authority that the Oklahoma 
prison was sewing on labels, partly concealing the 
v/ord Compact. 

The Administration wrote the warden of the prison 
asking that he correct this ratter and also referred the 
matter to the Prison Labor Authority who likewise wrote 
him. Letter has been received from the warden that this 
method of sewing an the labels has been corrected and 
the Label Review Officer ;f the Cotton Garment Code 
Authority has been se notified, 

Several Complaints "nave been received from the Marking 
Levice Industry concerning unfair competition of the 
prisons in the making of automobile tags. 

More than 80' i of bhese license tags made by the 
prisons are for state use and .are not put on the open 
market. This is a good example of a state use ind\istry. 

Complaint received from Benjamin T. Crump, Co., Inc. 
against the Kentucky V/hip and Cellar Co., — Stated 
that the prices ef the Kentucky Whip and Collar Company 
were considerably below prices of free industry. 



9742 



-49- 

This Conrolaint was referred to the Prison Labor 
Authority "by the Administration with the request that 
an investigation he made. A conference was held between 
the Prison Tabor .Authority and the Saddlery Industry 
Code Authority with members of the above companies and 
a satisfactory agreement to all parties was reached. 

Rom-plain t received from the Diamond Jthip Co ., of Chicago, 
Illinois, against the State prison at Moundsville, Test 
Virginia, that the prices at which the prison sold whips 
was considerauly below the price of free industry. 

This complaint was referred to the prison Labor 
Authority and was handled oy that Authority in the same 
manner as the complaint against the Kentucky TThip and 
Collar Co. , that is, a conference was held between 
prison officials at Moundsville and the Saddlery Industry 
and prison Labor Authority and a satisfactory agreement 
reached. 

Complaint rec eived from J. J. Mcintosh Sons, Corp . , 
of Tipton, Indiana against the Indiana prisons con- 
cerning the sale of prison-made brooms on the open 
market without any identification label. 

This matter was referred to the Prison Labor Authority. 
The Authority asked Mr. Hanagan of the Indiana prison 
industries to confer with come members of the Mcintosh 
Company to see if some satisfactory arrangement could not 
be made, Sucha conference was held, but under the Com- 
pact, it is not necessary for brooms to have a label and 
neither is there any law in the State of Indiana for- 
biding the sale of prison products on the open mark3t. 
Therefore, this does not come within .the scope of the 
Prison Labor Authority. 

Complaints r ece ived from the Belmont Trap P.ock Company , 
Ind. , of Staunton, 'Virginia and the Powhatan Lime Co., 
of Richmond, Virginia, against the State Lime Grinding 
Plant, which uses convict labor. 

Virginia is not a signatory to the Compact and also 
operates under the State Use System, therefore, this 
matter does not come under the jurisdiction of the Pri- 
son Labor Authority or the Administration. 

S everal Complaints received against the Gatch Brush and 
Wj re Goods Company of Baltimore using convict labor and 
that their prices were considerably below that of free 
industry. 

As the -convict labor used by this company is from 
the City Jail in Baltimore, the Administration and the 
Prison Labor Authority have no jurisdiction over them 



9742 



-50- 

under the Compact* The Gatch Brush and Wire Good 
Company has expressed its drsirc to cooperate at such 
time as they may come under the Compact of ^Fair Com- 
petition. 

Complaint received from E. C. Stammer John of Boonvillc, 
Missouri against 'the Missouri Training School for Boys 
of that City. Unfair competition in flower "business. 

This was referred to the Prison Labor Authority who 
referred it to lir', Stephen 3. Hunter, Director of the 
Missouri Penal Institutions with the request that he 
straighten this '■'matter out. Mr. Stanmer John .'was asked 
to furnish affidavits substantiating his complaint 'that 
the prison prices were much lower than his. 

Complaints received from the Cotton ferment Code Authority 
and many nationally known clothing manufacturers against 
the proposed contract of the Kentucky State Department of 
Public W elfare and the Muffine Shirt Company of Mashville, 
Tennessee. 

Public hearing was held on this Kentucky contract and 
the Kentucky officials agreed to write a new contract. 
However, from the records available the State of Kentucky 
did not enter into the new contract. 

In addition there' had boon -many minor complaints and objections 
filed concerning the methods used by prisons and "orison contractors 
in disposing of their manufactured or processed articles. In the 
majority of cases, these were disposed of "by referring them directly 
to the Prison Labor Authority where practically all were settled 
amicably. There was, however, objection on the part of the Cotton 
Garment Manufacturing Industry against the placing of prison manu- 
factured' cotton garments on the open market. During the months of 
January, February and March, \L935, the Public A encies Division of 
H.R.A. received several petitions which had been forwarded to Mr. 
Donald Ricliberg, Chief Counsel of H.R.A. from the United Garment 
Workers' of America, District Council, No. 4, of St. Louis, Missouri. (*) 
These petitions protested against any form of an M.R.A. label on prison- 
made cotton garments. On March 6, 1934, a letter was submitted to the 
above mentioned Council of the Mnited Garment Workers of America by 
V. J. Clarke, Assistant Deputy Administrator, Public Agencies Division, 
M.P..A., informing' the "Council that prior to the adoption of a MRA 
insignia as set forth in Administrative Order Mo. 7-3, the question 
involving the use of IT. R. A. labels on prison-made products was 
presented to the public in general in the form of a public hearing 
on May 28, 1934, at Washington, D*. C. The hearing lasted throughout 
the entire day. and the question was discussed at considerable length 
by both representatives of prison institutions as well as representa- 
tives of organized labor. Further the American Federation of Labor 
(*) See petition submitted to H.R.A. by United Garment Workers of 

America, District Council Mo. 4, St. Louis, Mo.', United Garment 

Workers of America File. Prison Labor Files. 



9742 



-51- 

was represented at this hearing by its Secretary, Mr. Frank Morrison, 
and that the contentions of the labor groups as set forth in the 
above mentioned -petitions were ably presented at that time. (*) 

When satisfactory settlement regarding complaints could not be 
reached after representatives of the complaining Code Authorities 
and industry had conferred with the Prison Labor Authority, the MA 
would reauest the Prison Labor Authority to hold * hearing as t>ro- 
vided for under Article VII, Section 3 (g) of the Compact. The out- 
standing case which the Prison Labor Authority handled involved the 
refusal to sell labels to a -orison contractor. In this case the 
Huffine Shirt Company of Nashville, Tennessee, entered into what 
purported to be a -orison labor contract with the Department of Public 
Welfare of Kentucky which supervised the State Penitentiary at 
Eddieville, Kentucky. At the public hearing on this cuestion the 
legality of this proposed contract was questioned because it lacked 
any specific element of consideration. However, the Prison Labor 
Authority, after a hearing, decider! that it would not sell labels 
to the Huffine Shirt Company or the State <">f Kentucky under the terms 
of this contract because there was no assurance that the Prison con- 
tractors would comply with the terms of the Compact. (**) 

Furthermore it was felt that for the State of Kentucky to engage 
in the contracting of its prisoners for the manufacture of work shirts 
would not assist in prohibiting the expansion of an existing -orison 
industry which already bore a disproportionate share of competition as 
provided for in Article VII, Section 2 (f-2). 

VI. COMPLIANCE DIVISION COMPLAINTS. 

After the Prison Labor Authority was formally organized on 
May 1, 1934, practically all complaints against -orison-made goods 
were adjusted by that Authority. However, Division Eight of the N.R.A. 
did handle such ccnvolaints as were filed with the Compliance Division 
by referring them to the Prison Labor Authority for settlement. As 
the Compact was a voluntary agreement no coiiroliance cases were taken 
into court. All questions involving compliance difficulties were 
handled in a cooperative manner by the" complainant Code Authorities, 



(*) For further complaints of various natures against -orison-made 
cotton garments by the Cotton Garment Code Authority and the 
National Work Shirt Manufacturers Association, see Prison Labor 
File titled "Cotton Garment Code Authority and National Work 
Shirt Manufacturers," Former Public Agencies Division, N.R.A. 

(**) Kentucky Prison Contracts. Prison Labor File. 



9743 



-53- 



the Prison Labor Authority, the Compliance Division and Division 
Eight of U.S.A. under the direction of Acting Division Administrator, 
Linton M. Collins. 

VII. NATURE OF COMPLAINTS. 

The following classification is an appraisal of the nature of 
complaints broken down into five general groups. 

( 1) Complaints '"based upon the contention that the 
■prisons were selling -orison-made goods in conroeti- 
tive areas "below the price for which free industry 
goods was selling in the same areas - 70^. 

(2) Complaints concerning the sale of prison-made 
goods in states o-oerating under the Hewes-Cooper 
Act or under a -potential State Use System - 10*1. 

(3) Conrolaints concerning the improper sewing on 
prison-made goods of the Conroact label for the 
apparent puroose of hiding identity of where the 
goods was manufactured - 5^. 

(4) Complaints against various -orison institutions 
attempting to increase -orison production or con- 
tract for new products - approximately 10^. 

(5) Complaints of a miscellaneous nature - 5^. 

VIII. INDUSTRIES MOST ACTIVE IN ENTERING COMPLAINTS AGAINST PRISON 
MADE GOODS 

Although the Cotton Garment Industry Code Authority and the 
various national associations connected with the Cotton Garment 
Manufacturing Industry were most active in entering conrolaints and 
protests with the National Recovery Administration against the sale 
of prison-made products on the public market, the following industries 
were outstanding in filing complaints and protesting against prison 
production affecting their industries. 

1. The Twine and Cordage Manufacturing Industry. 

2. The Marking Devices Industry. 

3. The Saddlery and Leather Goods Manufacturing Industry. 

4. The Farm Eauipment Manufacturing Industry. 

5. The Furniture Manufacturing Industry. 

6. The Stove and Stove Casting Manufacturing Industry. 

7. The Crushed Stone Industries. 

8. The Brick, Tile and Reenforced Pipe Manufacturing Industries. 

IX. OTHER INDUSTRIES AFFECTED BY PRISON COMPETITION 

In addition to those industries there are other industries 
affected by prison production making a total in all of some sixty 
industries. (*) 

(*) Appendix No. 3. 
9742 



CH APTER V I 

ULI'A N COH ITTSE REFORT 

1. 36-HOUR WEEK" FOR COTTON GARMENT INDUSTRY. 

By Executive Order No. 6828, Amendment No. 7, to the Code of Fair 
Competition for the Cotton Garment Industry was approved on August 31, 
1934. Farts II and III of the Amendment changed the maximum hour 
(Article III) and minimum wage (Article IV) provisions of the Code. (*) 
The 40-hour work i"eek of the Cotton Garment Industry Code resulted in 
unfair competition between members of the apparel industry under it 
and members under other apparel codes which had rrovisions for thirty- 
five and thirty-six hour weeks. In order to bring about more reemploy- 
ment and correct the unfair competition existing because of the Cotton 
Garment Industry Code forty hour work week provision, it became necessary 
to make a reduction to thirty-six hours, and, at the same time, make a 
proportionate increase in pay of employees so as to maintain the same 
weekly wage rate as provided in the approved Code of November 17, 1933. (*f) 

On September 28, 1934, an Executive Order of an Administrative 
nature, No. 118-132, pertaining to the Cotton Garment Industry Code was 
approved by the President. This Order stayed Executive Order No. 6828 
of August 21, 1934, to and including October 15, 1934. (***) It directed 
the National Industrial Recovery Board to appoint an impartial committee 
of three persons to hear protests, investigate the facts and report re- 
commendations to the President no later than October 10, 1934, on the 
Amendment of Articles III and IV of the Cotton Garment Code, approved 
August 21, 1934. 

The Committee appointed by the National Industrial Recovery Board 
consisted of D. M. Nelson, Member of the Industrial Advisory Board; 
Willard Hotchkiss, Chairman of the NRA General Code Authority, and W. 
Jett Lauck, economist. This Committee (frequently referred to as the 
Hotchkiss Committee on Cotton Garments) submitted their report in com- 
pliance with the President's request and recommended that Executive 
Order No. 6828. of August 21, 1934, be sustained. They also recommended 
that the National Industrial Recovery Board designate a commission to 
investigate the effect of competition of products of prison labor and of 
sheltered workshops on certain subdivisions of the Cotton Garment Industry 
to study the operation of the Prison Labor Compact, especially as to the 
enforcement of standards of competition of private industry there setup, 
and report not later than December 1, 1934, upon ways and means of effect- 
ively meeting this issues. (****) 

(*) See Volume XV, Fage 387 Frinted Code. 

(**) Administrator's Letter of Transmittal to Fresident of Amendment 

No. 7, August 21, 1934. 
(***) See Volume XVII, Fage 523 Frinted Code. 
(****) Appendix Bo. C — N.R.A. Release No. 8314. 



9742 



-54- 

II. EXECUTIVE ORDER NO. 118-135, OCTOBER 12, 1934. 

On October 12, 1934, another Executive Order of an Administrative 
nature, No. 110-135, pertaining to the Cotton Garment Industry Code was 
approved by the Fresident. Among other matters concerning the Cotton 
Garment Industry the Order provided: 

"That the National Industrial Recovery Board forthwith 
appoint a committee of three impartial persons, which 
committee shall investigate the effects of competition 
between the products of prison labor and sheltered work- 
shops on the one hand and of the cotton garment industry 
on the other, study the operation of the Frison Labor 
Compact especially as to the enforcement of the standards 
of competition with private industry established therein, 
and report to the National Industrial Recovery Board con- 
cerning said matters not later than December 1, 1934." (*) 

In accordance therewith the Ulman Committee was appointed. This 
Committee consisted of Judge Joseph N. Ulman, as Chairman, Frank Tannen- 
baum and W. Jett Lauck. Mr. James F. Davis of the Division of Research 
and Flanning of NRA, was selected as secretary to the Committee. 

III. FOINTS CONCERNING FRISON LABOR COVERED BY THE INVESTIGATING 
COMMITTEE. 

The Committee started holding hearings on November 7, 1934, and 
continued through until November 26, 1934, when they submitted their 
report to the National Industrial Recovery Board. (**) 

The following was taken from the letter of transmittal accompanying 
the -report of the Committee to the National Industrial Recovery Board, 
covering the points considered by the Committee in arriving at its 
conclusions: 

"In order to consider adequately the relatively narrow 
questions that have arisen and will arise between the 
Prison Labor Authority and the several Code Authorities 
administering industries subject to prison labor compe- 
tition, we have taken into account the whole question of 
prison labor as it is related to 

(a) the underlying purposes of imprisonment for crime; 

(b)'the economical and effective administration of prisons; 

(c) the extent and effects of competition between prison labor 
and free labor in specific industries; 

(d) the developed policies of State and National governments 
in relation to the whole subject; 



(*) See Volume XVIII Fage 621, Frinted Code. 
(**) Appendix D, NRA Release No.'9029-A 



9742 



-55- 

(e) attitudes of industry; 

( f ) attitude of labor; 

(g) the relationship of a proper regulation of prison labor 
to a rational attack upon the problem of crime." (*) 

IV. LIST OF FERSONS APFEARING BEFORE ULMaM COMMITTEE REPRESENTING 

INDUSTRY, ORGANIZED LABOR, PRISON ADMINISTRATORS AND NRA OFFICIALS 

The following persons appeared before the Committee and made state- 
ments for the record and answered inquires from the Committee Members. 
Those representing Industry were: 

Raymond A. Walsh, General Counsel, 
Cotton Garment Code Autnority. 

R. B. Paddock, Executive Director, 
Cotton Garment Code Authority. 

Ben Geaslin, Assistant Counsel, 
Cotton Garment Code Authority. 

A. B. Dickinson, Washington Representative, 
Cotton Garment Code Authority. 

Herbert Mayer, Chairman, Frison Committee, 
Cotton Garment Code Authority. 

A. B. Salent of Salent and Salent, Incorporated. 

Isadore Fine, Freaident, 

Bational Workshirt Manufacturers Association. 

Harry Johnson, Oberman and Company. 

W. W. Harlin, Frison Committee, Cotton Garment Code. 

C. F. Habegger, Frison Committee, Cotton Garment Code. 

L. M. Jones, Frison Committee, Cotton Garment Code. 

Walter Mitchell, Jr., Executive Secretary, 
Furniture Manufacturers Code Authority. 

D. F. Forterfield, Director, 
Department of Marketing, United Typo the tae 

J. H. Nelson, Secretary, Trade Fractice Committee, 
Public Seating Industry. 

W. C. Craig, Chairman, 

Binder Twine Agency of Code Authority. 

(*) Appendix No. D -NRA Release No. 9029-A. 
9742 



-56- 

J. S. McDaniel, Executive Secretary. 
Cordage and Twine Code Authority. 

Those representing Organized Labor were: 

Thomas Rickert, Fresident, United Garment Workers. 

Charles II. Green, International Ladies Garment Association. 

William C. Hushing, American Federation of Labor. 

G. E. Meadows, American Federation of Labor. 

Rose Senile idermnn, Labor Advisory Board, 
National Recovery Administration. 

Jacob Fetofsky, Assistant President, 
.-American Clothing Workers. 

Sidney Hillman conferred with the Committee in his dual capacity 
as Fresident of the Amalgamated Clothing Workers and Member of 
the Labor Advisory Board; However, his statement is not in- 
cluded in the stenographic transcript of the hearing. 

Those representing the Penal Instit\itions were: 

Sanford Bates, Director, Federal Bureau of Frisons. 

James V. Bennett, Secretary, 
Frison Labor Authority. 

Howard B. Gill, Economic Adviser, 
Frison Labor Authority. 

Walter N. Thayer, Commissioner, 
Department of Correction, New York State 

K. H. Stewart, Superintendent, 
Frison Industries, State of Alabama. 

Robert Chapman, Superintendent, 

Prison Industries, Missouri State Frison. 

L. E. Eunkle, Warden, Indiana Fenitentiary . 

E. L. Fardue, Superintendent, 
Industries State of Tennessee. 

C. L. Stebbins, Superintendent, 
Michigan State Industries. 

Samuel E. Brown, Warden, Oklahoma Fenitentiary. 



9742 



-57- 

H. E. Donnell, Superintendent, 
Prisons of State of .Maryland. 

i 
Those representing the National Recovery Administration were: 

Linton M. Collins, Acting Division Administrator, 
National Recovery Administration. 

J. M. Keating, Legal Adviser of Dress Manufacturers 
Code Authority; formerly Legal Adviser to National 
Recovery Administration on the prison. labor problem. 

B. J. Gitchell, Special Adviser, 
National Recovery Administration. 

H. E. fahrenbrock, Legal Adviser, 
National Recovery Administration. 

Feter Seitz, Legal Adviser, 
National Recovery Administration. 

Lester Xintzing, Industrial Advisory Board, 
National Recovery Administration. 

Mercer G-. Johnston, Consumers Advisory Board, 
National Recovery Administration. 

Sol A. Rosenblatt, Division Administrator, 
National Recovery Administration 

David Ziskind, Labor Advisory Board, 
National Recovery Administration. 

V. COMMITTEE REFORT - NRA RELEASE NO. 90139 -A. 

On November 26, 1931. the Ulrnan Committee submitted its report to 
the National Industrial Recovery Board on competition of products of 
the Cotton Garment Industry with products of prison labor as directed 
by Executive Order No. 118-135 of October 12, 1934. A copy of this 
report was mimeographed for public release on November 28, 1934. (*) 

The arguments which Industry presented are broken down into three 
sections. First, that of The Cotton Garment Industry, which is briefly 
summed up by the following quotation: 

"The testimony given by this group is important out 
of all proportion to its accuracy in detail, a state 
of mind, whether based on fact, fear, or fancy, is some- 
thing that must be reckoned with. These manufacturers 
are determined that competing prison labor must. go. 
They regard the Prison Labor Compact as a means' of 
perpetuating it, of increasing rather than decreasing 



(*) Appendix No. D -NRA Release No. 9029-A 



9742 



-58- 

the competition of prison made goods with those 
of their own manufacture. Sight or wrong, they 
are prepared to fight on this issue to the bitter 
end. In this fight they are working hand in hand 
with lator, and they have the support of large 
sections of the distributing trade and the consuming 
public. Such women's organizations as the federation 
of Somen's Clubs, tr.e Consumer's League and others 
have joined the manufacturers and labor in the dis- 
semination of the thought that goods made in a prison 
are essentially wicked goods that must not enter into 
commerce ." 

"This group favors the State Use System of prison 
production." (*) 

Second - The Twine and Cordage Industry: 

"Although the prisons produce one- third of the binder- 
twine made in this country, this industry seems willing 
that prison industry in this line shall continue, pro- 
vided that under the Prison Labor Compact there can be 
secured equality, of competitive prices, and provided 
that each State snalL confine its sales within its own 
borders. It relies upon the Hawes-Cooper Act and the 
Prison Labor. Compact as means toward these ends, although 
it complains that a differential in favor of prison labor 
costs has been set up and that there has been a lack of 
cooperation with the industry in the fixing of prices 
of prison-made goods.' It makes no charge of bad faith, 
but asserts vigorously that administration of the compact 
has been inefficient. "(**) 

Third - Other Industries, particularly Furniture, School 
Desks, etc . : 

"Witnesses appearing before us indicate no ' immediately 
pressing questions in these lines.' Generally, they 
object to a labor cost differential favoring prisons 
and urge closer cooperation between' Prison Labor Authority 
and the several trade Code Authorities. They favor the 
State Use System but admit that in some States where that 
system prevails certain industries have succeeded in cur- 
tailing the distribution of prison-made products to state, 
county, and municipal agencies of ' government ." (***) 

Then came the. arguments of Frison- Management which are summarized 
but covered in a general way by the last paragraph of the argument which 
is as follows: 

(*) Appendix No. D, Fage 5 - IRA Release No. 9029-A 
(**) Appendix No. D, Page 5 - N3A Release No. 90S9-A. 
(***) Appendix No. D, Fage 5 - USA Release No. 9029-a. 

9742 



-59- 

"In short, while this group as a whole favors the 
State Use System in principle, it emphasizes the 
practical difficulties that stand in the way of its 
general adoption, therefore, its members urge that 
the Prison Compact be upheld and that practice under 
it be perfected; but they are positive that this can 
be accomplished only if the NHA label for prison made 
goods is continued in its pres-jnt form. In answer to 
the suggestion that this label differs only metaphysically 
from the ordinary NBA Blue Eagle Label of commerce and 
therefore operates as an instrument of deception to 
which the Federal Government ought not give its sanction, 
they reply that under the Compact the labor of men in 
prison must conform to the same standards of hours, com- 
pensation, and sound working conditions as are required 
for free wor3:ers. They tend to blink the obvious facts 
that compensation paid to a State by a prison contractor 
is not precisely the same thing as wages paid a worker 
for his and his family's support, and that many States 
operating prison factories on the State Account System 
justify the payment of merely nominal wages to their 
prisoners (often as low as 50 cents a month) on the 
ground that the State spends $1.00 or more per day to 
feed, house, clothe and guard each prisoner. And they 
ignore entirely the additional fact that goods made in 
prison and bearing a Blue Eagle label can by no stretch 
of the imagination be said to nave been produced by 
labor invested with the right to collective bargaining." (*) 

The arguments advanced by the witnesses for organized labor take a 
firm and uncompromising stand. They are as follows: 

"(a) Competition in the open market between goods 
made in prison and free labor production must 
cease at once. 



"(b) The Hawes-Cooper Act is sound policy and good 1 



aw. 



"(c) The Frison Labor Compact has no legal or moral right 
to en N3A Blue Eagle label. She present form of 
label works a deliberate fraud upon the public and 
is unfair to labor. 

"(d) To them the foregoing principles are so fundamental 

and so irrefutable that one of the principle witnesses 
in this group refused to discuss, even by way of 
assumption for the purpose of argument, such questions 
as (l) whether the differential allowed in favor of 
prison labor is so great as to defeat fair competition 
under the compact or (2) what, if any, administrative 
changes may be desirable to bring ab rat a better cooper- 
ation between the Frison Labor Authority and the several 
competing Code authorities." (**) 

(*) Appendix No. D. Fage 6 - IIRA Relea^T No. 9029-A. 
(**) Appendix No. D. Fage 8 - IIRA Release No. 9029-A. 

9742 



-60- 



The following summary of the testimony of the Staff ■Ilembers of tlic 
Legal ancl other 'Divisions of the IIRA is as follows: • 

"These witnesses were very helpful to us ir. clearing away 
numerous points of o.ifferehce r< 1 .ting to the proceedings leading 
to the preparation and adoption of the Compact and the authoriza- 
tion l the EhA' label under the Compact. Especially in regard 
to the latter, it had b en charged, by the Cotton Garment Industry 
not merely that the label is misleading and deceptive but that it 
?;as authorized without notice and put into use surreptitiously. 
There witnes r - detailed to us the official steps taken in these 
procedures and also told of various preliminary conferences be- 
tween representatives of the interested groups. .The importance 
of this testimony is reflected in our Finding III, (infra). 

"They insisted that 'the regulation of prison industry must 
he committee" to its own Prison Labor Authority Administrator and 
that it would be unsound and impracticable to transfer this 
function to the several interested and competing Cede Authorities 
and Administrators. Eut they conceded the desirability of 
developing a plan for the better co-ordination of -these activities. 
They tvc us convincing evidence of lac 1 ; of co-operation and 
obstructive ta.ctics on the part of the Cotton Garment Code 
Authority during the months that the Conroact has been in existence.' 

The testimony of Dr. Louis II. Robinson of Swarthmore College, 
Swarthmore., Pennsylvania, one of the foremost authorities on the subject 
of orison labor in the United States, is summarised as follows': — 

"Professor Robinson was the only witness whose testimony may 
be described as entirely objective. In theory, he favors the 
State Use System above all others; but he : ;oointed out tnat in 
practice this system not only has- failed- to reduce idleness in 
prison but in many instances has increased it. This he attributes 
to several factors, viz:- 

"1. Host State's that have- adopted this plan passed imperfect 
laws. A State Use lea', if it is to produce satisfactory 
results, must -orescribe the compulsory tmrchase by 
State agencies, departments, institxitions , counties, and 
municipalities of all chesses of goods produced in the 
Stete*s prisons that are required by such agencies, 

-achusetts is "oointecl out as the State that has de- 
vised and adopted the best Statiite. 

','2. He questions the sincerity of some of the proponents of 
this system. For example, individual members of a 
certain organization I manufacturers which is conduct- 
ing an "educational ca-mpai; . " for State Use are known 
to have trier., in States -ner. the.- system is already 
established, to restrict the torch; a of orison made 
_ ggoods to institxitions for the housing of prisoners. 



(*) Appendix Uo. D - Page 2 - NBA lelease Ho. 3029-A. 



9742 



similarly, the representatives of given industries use 
political pressure and like means to secure the exemption 
of their particular industry from the operation of the 
lav;. Tor example, in the State of I-Tew York, though the 
prisons are equipped to build furniture of all kinds, 
not a stick of school furniture is permitted to "be made 
by prison labor. Certain labor organizations have been 
active in similar attempts to restrict the effective 
operation of the State Use System, in spite of the fact 
that Labor gives the system its unqualified indorsement 
when it is discussed as an abstraction. 

"3. If the State Use System is to become effective in re- 
ducing prison idleness, each 'State employing it must 
conduct a careful investigation by competent production 
engineers to determine the needs of the State and of 
its political subdivisions that can be sup lied by the 
labor of prisoners. This must be followed by a 
thorough over-hauling of the State's setup of prison 
industry,'- always with an eye to the following requisites: 

"a. The safe confinement of the prisoners. 

"b. The provision for them of real, productive work on 
• full time, as measured by free industry in like 
fields. 

"c. The diversification of prison products to the 

greatest practicable degree, so that no one product 
will monopolize the market to the injury of outside 
industry and free labor. 

"d. The selection, to as great a degree as possible, 

of industries for prison labor that tend to fit the 
prisoner to make an honest living after his release.. 

"Professor Hobihson admits that this ideal has not been 
realized anywhere up to the present time. But he attributes 
this primarily to the factors outlined in subdivisions (1) 
and (2) above and not to any wealcness inherent in the System." 
(*) 

VI. TRANSCRIPT OF HEARISG 

The transcript of hearing on the investigation conducted by the 
Ulman Committee comprises a stenographic record of more than 1200 pages 
of exhibits ana testimony. The several witnesses listed heretofore 
were heard and all other interested parties were afforded an opportunity 
to be heard. The record appears to be quite complete insofar as the 
recommendations and arguments presented by the Cotton Garment groups 
are concerned. However, as to the 50 remaining odd industries affected 
by prison competition, the writer is of the opinion that much more 
evidence could have been secured from both free industry and prison 

industries had time permitted. 

(*) Appendix "_To. D - Pages 9 and 10 - ERA Release Ho. 9029-A. 

974-2 



-62- 

VII. FIEDIHGS OF ULMA2J COMMITTEE. 

After an analysis of the testimony submitted at' the hearing the 
Ulrnari Committee arrived at the following conclusions, which Fere: 

"I. The Prison Labor Compact has not solved the problem 
of prision labor and will not solve it permanently and con- 
structively. 

"II. The Prison Labor Compact is an indispensable part of 
any larger plan for the real solution of the problem of 
23rison labor. ■'-Hit it must be regarded as an interim measure . 

"III. The Compact was the product of a genuine desire to 
solve a hard problem. It has been administered fairly "by 
persons of the highest integrity. Any past errors in its 
administration have been only such as are inevitable in 
the development of a new instrumentality. 

"IV. The only true solution of the prison labor -oroblera is 
one that Fill effectually remove the products of prison 
labor from the ordinary channels of competitive trade and 
commerce. This means the State Use System. 

"V. The present and potential competition of prison in- 
dustry with the Cotton Garment Industry has created a 
special and acute problem that calls for immediate at- 
tention and relief." (*) 

VIII. PECOLilEIDATIOlSrS OF THE ULi.Ail CCMIlTIEE . 

After consideration the specific issues which were responsible for 
the Committee being called -ere: 

"(a.) The difficulties in the Cotton Garment Industry created 
by prison competition, and 

"(b) The complaints against the operations of the Prison 
Labor Compact." (**) 

The Committee made the following recommendations: 

"1. The Committee recommends that the National Industrial. 
Zecovery Board use its good offices with the President to set up 
through the Public 'Jorks Administration a fund of $50, 000,000 for 
the purpose of helping the states to meet the conditions specified 
in this report, so as completely to replan and reorganize their 
prison industries, removing prison-made goods from the open- market 
and finally bringing to an end the prison labor controversy vhich 



(*) Appendix 7lo. D - Pages 10, 11 and 12 - 1T3A Release To. 9029-A. 
(**) Appendix Ho. D - Page 13 - ERA Release No. 9029-A. 

9742 



-63- 



has ^burdened American industrial and political, life for so long 
a t irae . 

"2* The Committee, recommends that in the interim between the 
present and the tine vrhen the reorganization of the prison in- 
dustries can be effected by the use of the funds suggested above, 
the national Industrial Recovery Board use its good offices through. 
the president and the Federal Emergency Relief Administration to 
effect the purchase from the prisons of prison-made grrments, or to 
\vtilize the labor now employed on prison-made garments to make such 
other garments as the Federal Emergency Relief Administration nay 
deem preferable. The purchase of these garments by the Federal 
Emergency Relief Administration from the state prisons should be 
scheduled on a declining scale, and should cearje at the end of two 
years. 

"3. In addition to the -.immediate adoption of the "above program, 
the Committee further recommends that prison-made garments be barred 
in t: e public market by the xLthdrav/al of the Rational Recovery 
Adninistrr.tion label no 1 - attached to them, or by its modification to 
rea.d "prison made". The Committee suggests that a maximum of 1C 
days after the publication of this report be allowed to elapse be- 
fore the above proposal for the taking over of prison-made garments 
~q-j the Federal Emergency Relief Administration be effected. 

"4. The Committee recommends that the Prison Labor Authority 
be continued, and that its offices bo used as the agency in co- 
peration with which the above program is to be carried out, and that 
the loss in funds to the Prison Labor Authority v 'hich may result 
from the withdrawal of the label or its modification be supplied 
from the funds set aside by the Public TTorks Administrrtion. 

"5. The Committee recommends that an Executive Order empower 
the Rational Industrial Recovery Board to require an agreement bet- 
ween the Prison Labor Authority and the Code Authorities in the in- 
dustries affected by prison-made products in every instance of 
change in price or costs of products sold by the prison industries. 
If such an agreement cannot be had by mutual consultation, an im- 
partial chairman especially designated for that purpose should be 
named. 

"6. The Committee recommends that, by cooperation between 
the Rational Industrial Recovery Board, the Prison Labor Authority, 
end the Code Authorities affected, a quota system be established 
for all prison industries, limiting their production for the open 
market at a point no greater than that which existed at the time the 
prison Compact came into existence. 

"7. The Co miittee recommends that' i'f 'the -Rove conditions be 
fully met then the remaining state, county, .and city institutions 
now producing for the open market bs brought under the Prison 
Compact." (*) 



(*) Appendix Ro . D - Page 21 - RRA Release Ro. 9029-A. 



9742 



-64- 



A "brief summary of the Committee Report with the major findings 
and recommendation listed is made a part of this report as Appendix "0". 
This was published in the form of a Public NRA .Release Ho, 9029, 
November 29, 1934, This release is titled - "Replanning of Prison In- 
dustries in Stctes to Remove Products From Open Market Recommended to 
Nttioiial Industrial Recovery Board." (*) 

IX. BRA PUBLIC RELEASE 110. 9073. 

The national Industrial Recovery Board, on December 3, 1934, selected 
its Chairman, S. Clay '.Tilliaras, Sidney Hillman, Member, and Linton ".:, 
Collins, Acting Division Administrator in charge of the Compact to con- 
tact the Federal Emergency Relief Administration in an effort to det mine 
if that governmental agency could utilize prison labor garment production 
in the relief program, so that these garments might be removed from the 
open market. This was done in an endeavor to folic-' out Recommendation 
Ho. 2 of the Ulman Committee Report. (**) Several conferences ^ere held 
by this Co;.iiittee with representatives of the Federal Emergency Relief 
Administration, but at the time of the Schechter Decision by the Supreme 
Court no definite action had resulted and from the records available no 
purchases of prison goods were made by the Federal Emergency Relief Ad- 
ministration as part of the proposed program. 

Becau.se the National Industrial Recovery Board wished to obt ain 
additional data and legal opinions on the proposal for a $50,000,000 
P. J .A. program, it took no action on the proposal at its meeting of 
December 3rd, 1934. 

The Board requested the Division Administrator in charge of the 
Compact to look into the possibilities of limiting all prison production 
by a quota system based on the output of prison factories at the time the 
Compact was put into effect. The Board also deferred action on the Ulman 
Committee recommendation that the N.R.A. label then used by prison plants 
under the Prison Compact be taken away or made to carry the words 
"Prison Hade", pending further information and reports. (***) 

X. DEFINITE ACTION OF NATIONAL INDUSTRIAL RECOVERY BOARD ON ULFiAN 
COIIIITTEE REPORT, DECEMBER 3, 1934. 

Briefly the definite action by the National Industrial Recovery 
Board, December 3, 1934, may be stated as follows: 

"1. The Legal Department of.N.R.A. will give their views as 
to whether it is possible to enforce the quota system of prison 
'roduction, although they feel unofficially that it cannot be done 
without the voluntary acceptance by the states. 

"2. The F.E.R.A. will be interviewed to see if it willacccot 
the cotton garments as recommended. 

(*) Ap-oe::di:; No. E - NBA Release " T o. 00 r :? . 

(**) Appendix No. D - NBA Release No. 9029-A. 

(***) Appen&is No. F - NRA Release No, 9073. 

9742 



-65- 

"3. Division VIII of N.R.A. will gather statistics as to the 
manufacture and sale of prison products of all types during the 
last two or three years." (*) 

XI. COIISITTS OF PEISOiT LABOR AUTHORITY 0I T ULMAN COiiilTTEE REPORT. 

At the joint meeting of the Association of States Signatory to the 
Compact and the Prison Labor Authority, on December 10 and 11, 1934, 
considerable discussion took place over the merits md demerits of the 
Ulman Committee Report. After a talk by Judge Ulman, Chairman of the 
Investigating Committee, the Association appointed a Committee to study 
the Ulman Report and offer suggestions, to the Association -and the Prison 
Labor Authority so tha.t they might be in a better position to prepare a 
response to the Ulman Report. The following is the report of the Com- 
mittee to the Association which, in a general way, presents the reaction 
of the Prison grouos to the Ulamn Report; 

"R 

" REPORT OP CO; LITTLE OF THE. ASSOCIATION 
OF STATES SI GNATORY OH TLPLY TO ULi Ai.' REPORT. 

"Ue, the undersigned, members of the Committee appointed by 
the Chairman of the Association of States Signatory, to consider 
the Ulman Report beg leave to submit the following: 

"In the brief time at out disposal we were unable to do more 
than point out some of the obvious defects of the Ulman Report and 
to indicate very briefly what we think should be the reply of this 
groxip . 

"The Prison side of this prison labor controversy seldom is 
presented to the public, and it would take too long to do it in 
this report. Ue would call attention, however, that even if one 
left out of account entirely all the financial benefits that accrue 
to the state, the prisoner, and his family from the successful em- 
ployment of the prisoner, it must be remembered that there can be 
no successful rehabilitation program set up in the prisons which 
does not in large part rely on the employment of the prisoners. 

"This argument cannot be met by a. naive statement- of the sice 
of the state-use market. It is not the total sice of this market 
that metters but the amount of this market that the prisons "hen 
confronted by the active and unceasing opposition of free manu- 
facturers and free laborers can hope to "in for themselves. 

"There is a naive assumption running all through the Ulman 
Report that the adoption of the State-Use System means either the 
elimination of all competition between prison made goods and those 
produced by free labor or at least the reduction of this competition 
to a negligible amount. Actually the taking away from free manu- 
facturers of their present market consisting of state and local 
official buyers would have practically the same effect on the price 



(*) prison Labor Kinutes File, December 11, 1934. Meeting of prison 
Labor Authority - Page 10. 



9742 



-66- 



structure as the presence in the open market of the quantity of 
prison made goods which these official buyers had been accustomed 
to buy from free manufacturers. The truth is that in practice only 
lip service is paid to the ideal of state-use, namely the giving 
up by the prisons of the open market in exchange for a closed 
market. It is a one-sided contract which the states make when they 
enact a state-use law. They promise not to sell in the open market 
but the free manufacturers and the free laborers make no promise not 
to invade this closed market set aside for the prison industries. 

"Before the Federal Government or any of its agencies should 
try to force on the states the adoption of the state-use system, it 
should ask the code authorities of the industries affected to in- 
sert a clause in their respective codes forbidding their members to 
invade the state-use market. The time has come to demand a cessation 
in the pressure to adopt the state-use system until a way can be 
found to preserve the state-use market for the prison industries. 
Or if this plan is not feasible, Congress could act. It sought to 
prevent the appearance of prison goods on the open market, let it 
now finish the task by enacting if necessary a law which will keep 
the goods of free manufacturers out of the state-use market. 

"It has been suggested by the Ulman Committee that the Federal 
Government in some way finance the setting up of industries in 
those states which will agree to go over to the state-use system. 
We suggest that such loans be made a claim on the prison industries 
themselves and not on the states. This will compel the opening up 
of the state-use market to prison industries since without this 
market, the prison industries would fail. It is best for the 
Federal Government to make its loans in this fashion, as only thus 
will it get a true picture of the forces at work to make idleness 
in the prisons not a temporary but a permanent condition. 

"In our opinion, diversification will have more to do with the 
elimination of the prison problem, if by that we mean the employment 
of prisoners under fair conditions, and not simply the pleasing of 
certain specified free manufacturers and free labor groups, than 
will the adoption of a closed state-use system. We believe that 
the States should enter into a closer agreement on prison labor, 
and if they do not have the power to do this they should be given 
it by Congress. Following this, diversification should be a major 
policy of the Association of States Signatory and its decisions 
should be law. 

"Our final suggestion, on which we would lay most stress, is 
that the National Industrial Recovery Board send a committee con- 
sisting of its own experts and of individuals primarily interested 
in providing work for prisoners as a part of a rehabilitation pro- 
gram to the individual states or to a specified group of states, 
not for the purpose of helping the states to meet the conditions 
specified in the Ulman Report, as is requested, but to determine for 
itself by consulting legal authorities of the respective states and 
by observing at first hand the working of the state laws and the 
functioning of the prison labor industries themselves the exact con- 



9742 



-67- 



ditions prevailing in the prisons of these states and for the further 
purpose of suggesting what these states should do in the light of a 
larger prison labor program. We believe that the situation is so dif- 
ferent in some of the states from what it is in others that the uni- 
form adoption of the statc-usc system would be little short of a calam- 
ity. If the funds can "be had from the PWA, so much the better, but the 
point- which we wish to emphasize is that the Ulman Report does not fur- 
nish sufficient facts for a decision by the NIHB in view of the obvious 
economic and political defferences of the individual states. A com- 
mittee which" started out on the assumption that all it had to do was to 
determine the extent of the state-use market in a given State paid to 
plan the industries to supply this would find itself handicapped at the 
very start. 

"In the meantime, the PLA should be continued and should operate 
much as it has done under government oversight and in full agreement 
with the codes of the industries affected. 

'"(Sgd.) Louis ".'. Robinson, Chairman 

E. L. Parduc 

II. ". Stewart 

h. C. i.; chill an 

C. F. UcClintic." 

With this background the Prison Labor Authority undertook to pre- 
pare a. comprehensive report titled "Comments of the Prison Labor Author- 
ity on the Report of the Ulman Committee". This report was then pre- 
sented to the National Industrial Recovery Board for their considera- 
tion. (*) A summary of the conclusions reached hy the Prison. Labor 
Authority arc as follows: — 

"A. State-use 

"In order to promote diversification and to reduce the com- 
petition of prison-made products with the products of free in- 
dustry sold on the open market, we recommend 

"1. That the States Signatory to the Compact accept the aid 
of the Federal Government in setting up state-use in- 
dustries; 

"2. That any State having. or adopting an adequate state-use 
law may be entitled to a sha,re in- such aid; 



{*) Appendix Ho. G- - Comments of the prison Labor Authority On the 
Report of the Ulman Committee. 



9742 



-68- 

"3. That a state-use law to be "adequate" must include pro- 
visions that (a) all tax supported institutions or agen- 
cies must purchase from the prison industries such sup- 
plies as are made "by these industries and used "by such 
institutions or agencies unless granted a written re- 
lease from such purchase by the Governor or other of- 
ficer legally authorized to issue such releases; (b) pub- 
lic works and ways including highway construction, agri- 
cultural, horticulture, or mining activities constitute 
a proper state-use industry; (c) the SERA, or other state 
agency supplying products for the relief of unemployables 
on relief rolls, or for prisoners' families shall he re- 
garded as tax-supported institutions and agencies; and 
that (d) no statutory exemption from prison labor shall 
be granted to any industry. 

"4 That an "adequate" state-use law may be either a law 

establishing a state-use system exclusive of other sys- 
tems or a state-law concurrent with other systems as de- 
termined by the respective legislatures, so long as this 
law incorporates the essentials outlined under (3). 

"B. L State-use Prison Industries Corporation, 

"In order to carry out -the purposes set forth undir Section 
A, we recommend 

"1. That a Corporation known as the State-use Prison In- 
dustries Corporation be created by the President under 
Title I of the N.I.R.A. and that a fund of $1,^00,^00 I? 
set aside* to carry, out its purposes; 

"2. That the members of the PLA. constitute the Board of 
Directors of this corporation with power to appoint a 
General Manager and such other personnel as nay be neces-" 
sary to effectuate the purposes of the Corporation; 

"3. That grants to the states for the purposes of setting 
up and operating prison industries shall b« made only 
upon the recommendation of this Corporation; 

"4. That in granting such aid the Federal Government do so 

only on request from the properly constituted authorities 
and in anticipation of or subsequent to the adoption of 
an "adequate" state-use law in any state and after a care- 
ful study of the market for state-use and the necessary 
building, equipment, and personnel has been made by the 
Corporation in co-operation with the proper state. offic- 
ers in charge of the state prisons affected; 

"5. That the Corporation on the recommendations submitted to 
it by its staff and approved by the state officers af- 
feeted, shall recommend the grant of funds to be made to 
the State to build the necessary buildings, -to -purehap* 



9742 



-69- 



and install the necessary equipment using prison labor as 
far as practicable, and to supervise and operate such in- 
dustries as are established by these means for 5 years, 
the cost of such supervision and operation to be paid from 
the funds allocated and all expenses and receipts and any 
profits cr losses accruing from such operation to be 
charged against such funds/ and all buildings, and equip- 
ment, and any balance remaining in the fund a t the end of 
that period to be the property of the State as provided in 
the grant; 

"6. That the personnel to supervise and operate such indus- 
tries shall be chosen in the manner and under the regu- 
lations governing the choice of personnel in the prison 
affected and subject at all times to the Warden, Superin- 
tendent or other authority in charge of the prison, but 
for a period of five years the Corporation shall have the 
right to inspect and make recommendations as to the prop- 
er conduct of such industries and to audit their ac- 
counts. _ 

"C. Limitation on Opon iiarket Gales. 

"In such states as t>ermit the sale of prison-made goods on the 
open market, we recommend 

"1. That it be a condition precedent to the granting of Fed- 
eral aid as set forth in Sections A and 2, that an agree- 
ment be made, after consultation with the industrial code 
authority affected, between the Corporation and the prop- 
erly con stituted State authorities and those in charge 
of prison industries, which shall establish the limits 
beyond which such prison industries may not sell on the 
open market; 

"2. That the FERA. in anticipation of such limitation creat- 
ing further idleness or even maintaining present condi- 
tions and in furtherance of a constructive penal adminis- 
tration, permit the cooperating prison administrations to 
in troduce the following "work projects" for the free un- 
employed: medical, dental and nursing care; academic, 
vocational and a vocational instruction; occupational ther- 
apy; case studies including the mailing of case histories, 
treatment programs, and psychological and psychiatric ex- 
aminations and classifications of prisoners; welfare work 
among prisoners' families; recreation programs; and super- 
vision of paroled convicts including preparation for re- 
lease, such services to be supplied only upon the request 
of and to the extent ashed for and under the rules and 
regulations prescribed by the State authorities. 

D. Prison Labor Authority. 

"With regard to the aftnin'i strati on and enforcement of the 



9742 



-70- 

Prison Labor Authority, we recommend 

u l. That the PLA be continued and that provided the signa- 
tory states agree all state-use products be brought under 
its jurisdiction and assessments made on them for the sup- 
port of the PLA; 

"2. That for such goods as are sold on the open market by 
states complying with the Compact and agreeing either 
voluntai'ily or by statute to a limitation on such sales, 
the Compact label be issued as at present; 

"3. That the present price policy of the PLA as set forth in 
the minutes of the meeting of October 16, 1934, be con- 
tinued with appeal to the URA or to a permanent impar- 
tial arbiter appointed by the HIRE in case of dispute as 
provided in the Compact; 

"4. That the PLA be given jurisdiction over industries in 
any penal institution, jail, or house of correction 
which agrees to comply with the Compact. 

Respectfully submitted for 

The Prison Labor Authority 

TEIORSTSII SELLIH 

JOHH J. HAHHAH 

STEP HEN B. HUNTER" 

XII. PHI SOU LABOR AUTHORITY PROPOSAL TO EFFECTUATE RECOii.iEHDATIONS 
OF ULiiAB COMMITTEE. 

Prior to the Supreme Court decision of May 27, 1935, the Prison 
Labor Authority submitted a plan to the national Industrial Recovery 
Board. In the opinion of the Prison Executives of the States Signatory 
to the Compact, this plan if put into effect would have accomplished the 
objectives outlined in the recommendations of the Ulman Committee Report. 
Because of the nature of these recommendations and the extent to which 
the prison groups would willingly cooperate, the- writer feels that this 
entire plan should be embodied in this report. The plan is quoted as 
follows: 

"A Plan to Effectuate the Recommendations of 
the Ulman Committee Re Prison Competition 

"To effectuate the program outlined in the Report of the 
Ulman Committee and the Reply of tie Prison Labor Authority there- 
to, as requested, tie following is submitted for your consideration: 

PURCHASE OF PRI SOH-uAIXB GAPuiEITTS 

"1. 1TRA issue an order with, the anproval of the President 
9742 



■71- 



declarin g all cotton garments made in prisons and not sold to tax- 
supported institutions or agencies to "be "surplus commodities", of-* 
fective June 1st, 1935. 

"2. FEBA contract with the following prisons to purchase cot- 
ton garments or equivalent amounts not less than those specified 
below per year for two years at prices which shall be equal to the 
cost of production plus 5 f &„ (Cost of production shall include cost 
of all materials; ■ cost of civilian labor used for industrial super- 
vision, instruction or administration, but not including the cost 
of custodial guards; cost of overhead items including heat, light, 
power, machine repairs, and other items of general manufacturing 
expense including insurance, supplies, and small tools and reserves 
for replacements of plan and equipment; cost of wages paid inmates 
directly employed in the production of said articles, and cost of 
maintenance of inmates so employed.) In no case, however, shall the 
prices paid exceed the fair prevailing wholesale market price for 
comparable garments.- 



■Work Pants 


- Value - 


Quantity 


Dele ware 


(he) 


$ 75,000 - 


10,000 doz. 


Indiana 


(or) 


250,000 - 


35,000 " 


Kentucky 


Car) 


250,000 - 


35,000 " 


Missouri 


Up) 


500,000 - 


75,000 " 


Maryland 


(op) 


500,000 - 


75,000 " 


Oklahoma 


(sp) 


500,000 - 


75,000 « 


Llichigan 


(op) 


200,000 - 


30,000 " 


W. Virginia 


(sp) 


200,000 - 
$2, :.-75,0O0 


30.000 "■ 




365,000 " 


Work 


Shirts 


- Value - 


Quantity 


Florida 


(of) 


$ 75 ; 000 


- 20,000 doz. 


Tennessee 


(op) 


250,000- 


- 75 j 000 « 


Kentucky 


(op) 


250,000 


- 75,000' " 


Missouri 


(op) 


250,000 


- 75,000 " 


Maryland 


(he) 


150,000 


- 40,000 « 


Michigan 


(or) 


150,000 


- 40. COO " 






$1,125,00 


325 ;, 000 " 


. , 




2.475.000 


365*000 " 


Total 


5,600,000 


690,000 " 



sp - State Prison ; 

he - House of Correction 



sr - State Reformatory 
sf - State Farm 



"While these amounts arc tentative, they are based on actual 
production figures for 1934 and represent a fair division of the 
existing business among the prisons. 

"In order to provide labor for the inmates of the Alabama 
State Prison during this emergency, it is recommended that in mak- 
ing contracts with the States of Florida, Kentucky, Maryland, 
Michigan, Missouri, and Tennessee for the purchase of shirts (es- _ 
timated at $1,125,000 annually), the F3PA agree to furnish the 
chambray and purchase same from the Alabama prison at cost plus b)o. 



9742 



-72- 

This will provide approximately $500,000 worth of "business to the 
Alabama prison. 

"It should "be noted that allowing for free labor employed in 
prison industries and the cost of materials and trimmings purchased 
from free plants, that half of the money paid the prisons f*r 
these products (or $1,750,000) will go to free industry. 

"The above action would make unnecessary the withdrawal of the 
Compact '„Lab el sin ceit would no longer he us^d on cotton garments, 
the only prison product now requiring the label. Nevertheless the 
possession of the Compact Label by other prison industries is a 
valued insignia of cooperation and should be maintained. 

DEVELOPMENT OF STATE-USE III DUSTRISS IN STATE 
PRISONS AND LIMITATION OF OPEN MARKET SALES 

"1. PLA request the assignment of personnel for 2 years 
beginning Hay 1, 1935, under the Public Works Bill (K.J. Res. 117) 
which provides $300,000,000 for assistance for educational pro- 
fessional, and clerical persons (a) to conduct surveys of the law 
affecting prison industries especially in States now selling pris- 
on products on the open market and to present necessary legislation 
to establish adequate state-use laws in such States; (b) to make 
surveys of the market for state-use products among the institutions 
and other tax-supported agencies of these States and their polit- 
ical subdivisions, to prepare a program of state-use industries for 
these States as a result of such surveys, and to present to the 
proper Federal authorities projocts for the erection of buildings, 
purchase and installation of equipment and other necessary expend- 
itures for plant and personnel to establish such state-use indus- 
tries in the States co-operating; and (c) to study the problem of 
providing constructive activities for idle prisoners and to develop 
such activities. 

"Following is a tentative list of personnel to carry out the 
work outlined herewith. 

"(a) For purvey and preparation of stats 

legislation affecting prison industries 

1 Attorney and 4 Field Agents 

2 Assistants (Stenographic and clerical) 

(for 2 years) 

"(b) For surveys of state-use markets and 
preparation of state-use projects 

6 Industrial Engineers (l Chief, 1 Assistant, 

4 Field Supervisors) 
1 Assistant ( Stenographic and Clerical) 
(for 2 years) 



9742 



-73- 

144 Statisticians (l Chief, 1 Assistant, 1 Clerk 
in each of 48 or more States) 
(for 6 months) 

"(c) For development of programs of constructive activities 
for idle prisoners 

6 Directors of Rehabilitation (l Chief, 1 Assistant, 

4 Field Agents) 
1 Assistant (stenographic and Clerical) 
(for 2 years) 

255 Case-Workers, Teachers, Instructors, etc., for 
75 State Prisons and Reformatories and 10 Jails 
having industrial programs. (Average of 3 to each 
institution.) 

(for 13 months) 

"Total personnel required 420 

Approximate total cost $1,110,000 ($485,000 first year 

615,000 second year) 

"By the spring of 1936, each of the groups of 3 in the 85 
prisons, reformatories, and jails (see (c) above) will have 
developed a program which can employ an additional 1500 workers to 
promote constructive activities for the 75,000 idle prisoners who 
are n ow in these institutions. This assumes one worker for each 
group of 50 idle prisoners. 

"2. States will then, in co-operation with the Prison Labor 
Authority, present to the President proposed projects for setting 
up these state-use industries under the provisions r>f public Works 
Act (E.J. Res. 117) which allots $900,000,000 for loans or grants 
or both for projects of States, Territories, etc., under conditions_ 
as set forth in the Conclusions cf the Comments of the PLA on the 
Report of the Ulman Committee (See PLA Conclusions, B - 3, 4, 5, 6). 

"It is understood that funds as recommended by the Ulrnan Com- 
mittee will be set aside to provide for such projects. (See Report 
of Ulman r Commit tee, Recommendation Ho. 1.) 

"It is understood that States receiving such aid must (1) 
adopt "adequate" state-use laws. (See PLA Conclusions A - 3 and 
4); (2) agree, after consultation with the PLA and the Industrial 
Code Authority affected, to establish the limits beyond which 
prison industries in these States shall not sell on the open market. 
(See PLA Conclusions C - 1); and (3) make adequate provisions for 
taking care of idle prisoners. (See PLA Conclusions C - 2) . 

"Based on the estimates made by the Ulman Committee, if these 
projects are approved in the 30 or 40 States now manufacturing 
prison products, they should by the Spring of 1936 provide work for 
1 year for approximately 7000 workmen making materials and equipment 



9742 



-74- 

and for 7,500 construction workmen. This assumes a total expend- 
iture of- $50,000,000 'as proposed by the Ulman Committee for shops, 
equipment and materials for State-use industries divided as follows: 
$25,000,000 for equipment and materials representing the labor of 
5,000 industrial workers for 1 year and $25,000,000 for construction 
of which $15,000,000 represents labor of 7,500 workmen for 1 year 
and $10,000,000 represents material or 2,000 industrial workers 
for 1 year. 

"Altogether then this program can provide work for at least 
one year for approximately 2,000 "white collar" workers and 15,000 
construction and industrial , workers; and set in operation the means 
of reorganizing the prison program of America in line with the re- 
port of ,'the Ulman Committee. 

"3. To defray the expenses of maintaining the office of the 
PLA and to carry on the functions outlined in the Compact, the PLA 
will continue to make assessments on prison products sold on the 
open market. The PLA recommends .that similar assessments be levied 
on all prison products sold for State-use in States Signatory in- 
cluding cotton garments sold to the FERA or SERA. A revised bud- 
get and program covering these items will be submitted to the NRA 
at the close of the PLA fiscal year April 30, 1935. 

"If desired, the PLA will incorporate in order to -insure a 
continuing supervision over the projects noted in (2) beyond the 
emergency period. A number of Code Authorities including Retail 
Trade, Cotton Garment, Construction, have incorporated." 

Because of its nature and the possibilities involved, this plan, 
in the opinion of the writer, should be given careful consideration by 
both the prison and free industry groups and any Governmental Agency 
which may hereaf.tei attempt to solve the problem of prison labor versus 
free labor in the production of commodities which can be manufactured 
within the penal institutions. 

XIII. ACTION OF N.I.R.B., MAY 27, 1935, ACCEPTING IN PRINCIPLE PROGRAM 
TO REP LAN- AND REORGANIZE PRISON INDUSTRIES 

The morning of May 27, 1935, the national Industrial Recovery 
Beard met with Messrs. Coonley, Code Administration Director, and Collins, 
Acting Division Administrator, Public Agencies Division, in charge of the 
Compact. At this meeting the Board discussed the question of tho compet- 
ition of the products of prison labor with the products of frae industry. 
A statement was prepared, approved and later published for public v 're- 
lease which is as follows: 

"The National Industrial Recovery Board today adopted in 
principle, subject to the working out of details, the following 
statement in reference to the competition of prison-made products 
with the products of private industry: 

"1. The desirability of utilizing approximately $50,000,000 
of the relief fund to enable the states completely to 

9742 ' 



-75- 

replan and reorganize their prison industries and prison 
welfare activities, remove prison-made goods from the 
open market through diversification for state use, and 
finally "bring to an end the prison labor controversy which 
has so long burdened American industrial and political 
life. To this end it will at once suggest to the Presi- 
dent, 

(a) The desirability of establishing an agency, prop- 
erly representative of the interests concerned, to 
coordinate and supervise this work. 

(b) The desirability. of at once placing the Division 
' of Research and Planning of NEA in charge of the 

necessary survey. (The survey should be under 
way within a week.) 

"2. The , desirability (in the interim between the present 
and tho time whop the reorganization of the prison 
industries can bo effected by the use of the fund sug- 
gested above) of having the Federal Emergency Relief 
Administration effect the purchase from tho prisons of 
prison-made garments and other products, or arrange for 
the labor now employed on prison made garments to be ' 
utilized to make other garments for such purchase. The 
purchase of these garments by the Federal Emergency Re- 
lief Administration from the state prisons should be 
scheduled on a declining scale, and should cease at the 
end of two years. 

"3. The desirability of establishing by cooperation between 
the National Industrial Recovery Board, the Prison Labor 
Authority, and the Code Authorities affected, a que ta 
system for all prison industries. 

"4. In the meantime, the question of an appropriate label 
for any goods going into the open market will be re- 
examined by the NBA." 



9742 



-76- 



CHAPTER VII 

PRISOI! INDUSTRIES REORGANIZAT I ON ADMINISTRATION 

I. MEMORANDUM OF MAY 18, 1935,, FROM ACTING DIVISION ADMINISTRATOR 
COLLINS TO Lc C, MARSHALL URGING THAT DEFINITE ACTION BE TAKEN 
BY NATIONAL INDUSTRIAL RECOVERY BOARD TO FURTHER PRISON PROGRAM 
RECOMMENDED 3Y ULMAN COMMITTEE. 

On May- 18, 1935, Linton M. Collins, Acting Division Administrator, 
submitted to L. C. Marshall, .Executive Secretary of the National In- 
dustrial Recovery Board, a memorandum urging the Board to take definite 
action on the Prison Program recommended by the Ulman Committee. The 
body of the memorandum is as follows-: 

"It is evident that soms definite action should be 
taken by the National Industrial Recovery Board to further 
the prison program recommended by the Ulman Committee. The 
Prison Laboi Authority has appointed a committee to confer 
with the National .Industrial Recovery Board. The representa- 
tives of the states, are all anxious and eager for this pro- 
gram to be consummated at this time. *"e "ill secure their 
cooperation no 1 ", whereas an apathetic attitude is apt to 
result in a waning of their enthusiasm and cooperation. 

••There will be held' in Chioago on tne 23rd, a meeting 
of the representatives of the code authorities and industries 
affected by prison competition. There are now some fifty- 
seven industries in prisons. All of these groups have been 
invited to attend. Mr. Clarke and I "will be present at this 
meeting. This group is very eager to work out some program. 

"The President has indicated his interest, but has ex- 
pressed a doubt as to whether or not the program as recom- 
mended by the Ulman Committee would meet the "fundamental 
principles" which he must recognize in determining the 
eligibility of any projects. The Department of Justice has 
concurred in this. Mr. Sanford Bates, Director of the Bureau 
of Prisons dictated a plan whereby the Federal Government may 
assist the states to abolish unfair prison competition. This 
is solely a statement of policy which, if the President will 
sign and approve, will possibly, for these particular projects, 
be a substitution of the rules as to recognizing the necessary 
"fundamental principles". A copy of this is attached. It 
should have the approval of Mr. Richberg as Chairman. 

"It is necessary for the Board to take some kind of action 
and make its recommendations to the President immediately. If 
this could be done prior to the Chicago meeting on the 23rd and 
also prior to the hearing which the National Industrial Recovery 
Board will give the cotton garment group on Thursday, the 23rd, it 
will be most effective. Is there some way for you to work this 

out?" (*) 

(*) Memorandum of May 18, 1935, Prison Labor Program File, Former 
Publid Agencies Division, NBA. 

9742 



-77- 



The plan referred to as having been dictated by Mr. Sanford Bates, 
Director of the Bureau of Federal Prisons, is attached to this report as 
Appendix "PI". (*) 

The significant nortion of the memorandum is that in which the 
Acting Division Administrator joints out that representatives of the states 
were eager for the prison program to be consummated and that their coopera- 
tion could, at that time, be secured. It has previously been sho^m that 
the National Industrial Recovery Board did take action on May 27, 1935. (**) 

II. REPORT OP ORGANIZATION L2EETIHB CONFERENCE OF FREE INDUSTRIES ON 
ECONOMIC PLAN FOR PRISON MADE GOODS. 

At a meeting in Chicago on May 23rd of industrial groups interested 
in solving the problems involved in orison labor, the following actions 
were taken: — 

A. A permanent organization committee was selected and 
authorized to secure the active cooperation of all 
interested industries, if possible, and, pending 
final organization, to carry on the work in accord 
with the program adopted. The committee chosen 
was as follows: Henry J. Hanson, Chairman, Marking 
Devices Industry; Bon Geaslin, Attorney, Cordage 
Institute and Cotton Garment Industry; J. C. McCarthy, 
Furniture Mfg. Industry; G. H. Redding, Concrete Pipe 
Industry; Joseph C. Hodges, Advertising Metal Sign and 
Display Mfg. Industry. (***) 

B. The following five principles were adopted and endorsed 
singly and as a complete platform: 

"1. COOPERATION . Any permanent solution requires the 
the joint effort of free industry, orison officials, the 
Prison Labor Authority, and the Federal, Gocernment to de- 
velop an industrial program for the prisons which shall be 
fair to the prisons;,, the prisoners, free industry and labor, 
and the taxpayer. 

"2. DIVERSIFICATION AID LIMITATION . Prison competition 
with free labor and free industry should be limited so far as 
possible, with due regard to the reasonable employment of pri- 
soners, by diversification of prison industries and limitation 
of the amount and kind of articles produced and/or processed, 
without undue encroachment upon any industry. 

(*) Appendix No. H - A Plan TJhereby the Federal Government May Assist 
the Several States to Abolish Unfair Competition In Prison Indus- 
tries. 

( * * ) Page 

(***) Report, Conference of Free Industries on Economic Planning for 
Prison Made Products - Prison Labor Program File, Former Public 
Agencies Division, NBA. 

9742 



-78- 



"3. REGULATION . Prices and trade practices of prison 
industries, including state-use industries, should be brought 
under the jurisdiction of the Prison Labor Authority. 

"4. REHABILITATION. The use of income from prison in- 
dustries to develop educational, vocational and other construc- 
tive activities for otherwise idle prisoners should be a corroll- 
ary of any adequate prison industrial program. 

"5. FEDERAL AID TO PRISON INDUSTRIES. With .the aid of 
Federal funds the development of a "orison industries program in 
accordance with the principles outlined above should proceed 
immediately." (*) 

Ci Since it was deemed desirable to institute immediate, action 
and prepare the ground work of -oersonal conference, at an 
early date, the following telegram was sent to President 
Roosevelt: 

11 At a conference of representatives of free industries 
affected by prison comnetition, held at the Edgewater 
Beach Hotel today, it was. voted to. endorse the principle 
of Federal Aid to state prison industries as a basis 
for establishing an industrial program in the prisons 
of America which shall be fair to the prisons, ,free 
industry and the several states. We urge your approval 
of the proposal to allot funds to the states under the 
Emergency Relief Appropriation Act of 1935 to make sur- 
veys in the several states as a basis for such a program 
and to aid the' states in establishing a diversified 
program of prison industries and a constructive program 
of activities for idle prisoners. We respectfully re- 
quest that you appoint a joint committee representing 
free industry, the orisons, and the Federal Government 
to advise with the Emergency Relief Administration as 
to the conditions upon which such a program shall be 
established. We are prepared to send representatives 
to Washington to cooperate with the prisons and with the 
Federal Government in this program at your request." (**) 

On May 27, 1935, Mr. J. R. Swift, Chairma.ii of the Code Authority 
for the Marking Devices Industry, wrote the following letter to Mr. 
Donald Richberg, Acting Chairman of the National Industrial Recover 
Board. 



(*) Report, Conference of Free Industries and Economic Planning for 
Prison Made Products - Prison Labor Program File, Former Public 
Agencies Division, ERA. 

(**) Report, Conference of Free Industries on Economic Planning for 
Prison Made Products - Prison Labor Program File, Former Public 
Agencies Division, NBA. 



9742 



" Supplementing my letter of May 3, 1955, you will 
be interestec 1 to loiow that a conference of free i.i- 
dus tries, interested in the proposed program of 
Federal Ai# for prison industries, was held in 
Chicago, May 2':, at which twenty-Jane representatives 
of twelve industries seriously affected "by prison 
competition were present. As ■• result of the delib- 
erations of this conference, a platform of principles 
was adopted and a message sent to the President. A 
copy of each is enclosed. 

"An Organization Committee consisting of five repre- 
sentatives from the Fabricated Metals, Furniture, 
Cordage, Gotten Garment, Clay Products, and Marking 
Devices Industries v/ ( is appointed to formulate a per- 
manent Conference Committee. This Organization Commit- 
tee has also delegated me to go to Washington immediately 
and confer with you and the other members of the U.I.H.3., 
as to the procedure to follow in being of any assistance 
we may, in forwarding the plans how under consideration. 

"As I must be in New York or. other matters the early 
part of the week, beginning May 27 , I should like to 
make appointments to discuss these matters with you and 
any others you suggest, on Friday and Saturday, May 31 
and June 1. Will you kindly advise me, in care of the 
Superior Type Company, 203 Fifth Avenue, Mew York, 
whether this meets your convenience? 

"From the contacts which we have already had with Mr. 

Linton M. Collins, Division Administrator of 1T.R.A. 
Division Eight, nd with the officers of the Prison Labor 
Authority, as well as with representatives of free industry, 
we were led to believe that there is general approval of 
the proposal that Federal Aid be erctended to the states 
to reorganize prison industries from the funds available 
under the Emergency Relief Appropriation Act of 1935. 
We trust the President has given his approval to this 
general policy. We are, however, concerned about the 
conditions under which this money shall be alloted to 
the several states in order to insure the results desired. 
Several suggestions have been proposed, out the one which 
appeals most to the industries represented in the confer- 
ence recently held in Chicago, I believe, is that an 
Advisory Committee representing free industry, the prisons, 
and the Federal Government shall be established to asnist 
the Emergency Relief Administration in determining these 
conditions. 

"As action on this matter seems both imminent and im- 
perative (assuming that the President will approve the 
general policy of extending Federal Aid to state prisons) , 
I should like to propose that such an Advisory Committee 
be established by the President, five members of whom 



9742 



-80- 

shall be selected by the Conference of Free Industries, 
five by the Association of States Signatory to the 
compact, and five from the several departments and 
Agencies of the Federal Government interested, and 
that this Committee meet in Washington not later than 
June 50, to formulate the general conditions under which 
this Aid shall be granted, and to cooperate with the Fed- 
eral Government in this matter in any way possible. 

"I offer this suggestion in the hope that it may at least 
serve as a focus for discussion in any conference which 
may be possible while 1 am in Washington at the end of the 
week." (*) 

It is to be noted that Mr. Swift proposed (assuming that the Presi- 
dent will approve the general policy of extending aid to state prisons) 
that an Advisory Committee be established by the President of whom five 
members shall be selected by the conference of Free Industries, five by 
the Association of States Signatory to the Compact, and five from the 
several departments and Agencies of the Federal Government interested. 

Although invitations had been issued to interested industries, 
state prisons, Government and Labor Officials, to attend the Chicago 
"Organization Meeting Conferences of Free Industries on Economic Plan- 
ning for Prison-Made Good?", several representatives of trades and of 
industries whose products compete with prison made products met in New 
York City, May 30, 1935, and took such action as is outlined in the 
following 'telegram: 

"DONALD RICHBERC- 

CHAIEMAN NATL- INST NATL INDUSTRIAL CONFERENCE BOARD 

WASEDC ' 

AS CHAIRMAN OF INDUSTRIES CONFERENCE Oil PRISON LABQR ■,. 
ELECTED AT MEETING CITY CLT.B NEKYORK I.'-iY 20 ATTENDED 
BY REPRESENTATIVES OF COTTON TEXTILE BROOM HOSIERY 
DHDEBWEAIt COIDAGE TOYS FURNITURE COTTON GARMENT M/JJUFACTURERS 
AND WHOLESALE AND RETAIL DRY GOODS MERCHANTS STRONGLY URGE 
FOLLOWING PRINCIPLES AS BASIS FAVORABLE ACTION BY NIRB ON 
PRISON LABOR STOP FIRST IMMEDIATE APPROVAL ULMAN REPORT 
IN PRINCIPLE SHOOED IMMEDIATE WITHDRAWAL BLUE EAGLE FROM 
PRISON PRODUCTS THIRD RECOMliENDATION THAT APPROXIMATELY FIFTY 
MILLION DOLLARS BE EATIIAEKED UNDER RELIEF PROGRAM TO PROVIDE 
BUILDING AND EQUIPMENT FOR EXCLUSIVE STATE USE PRISON INDUSTRIES 
WHEN PROJECTS SUBMITTED MEET RELIEF REQUIREMENTS SUPPLEMENTED BY 
APPROVAL FROM NIRB CERTIFYING EACH PROJECT TO BE IN HARMONY WITH 
GENERAL INDUSTRIAL RECOVERY PROGRAM AND ULMAN REPORT FOURTH THAT 
REPRESENTATIVE ADVISORY COMMITTEE FROM INDUSTRY LABOR AND. PRISON 



(*) Letter of May 27, 1335 from Mr. J. R. Swift to Mr. Donald Richber; 
Prison Labor Program File, For.er Public Agencies Division, NRA. 



974-2 



-81- 



GROUPS WORK WITH KIR3 TO INSURE EXPENDITURES IE CONSTRUCTIVE 
MANNER STOP INDUSTRIES CONFERENCE HOLDS NEXT SCHEDULED MEETING 
JUKE 4 INVITING ALL INDUSTRIES HOT ALREADY REPRESENTED STOP 
OUP. PP.OGPJUv! CONTEMPLATES FURTHER DEVELOPEMENT OF AND ASSISTANCE 
TO SIMILARLY INTEGRATED STATE COMMITTEES ALSO COOPERATIVE AC- 
TIVITIES WITH ORGANIZED LABOR AND COHSUI.IER GROUPS INTERESTED 
IN PRISON EMPLOYMENT PROBLEMS. 

A E ALLISON CHAIRMAN 40 WORTH ST 1TEWY0EK" (*) 

III. MEMORANDUM OE ACTING DIVISION ADMINISTRATOR COLLIES TO L. C. 
MARSHALL, EXECUTIVE SECRETARY OE THE NATIONAL INDUSTRIAL 
RECOVERY BOARD, MAY 29, 1935, OUTLINING STEPS TO 3E TAKEN IN 
CONNECTION WITH NATIONAL INDUSTRIAL RECOVERY BOARD ACTION IN 
PRISON LABOR FIELD. 

After consultation with Mr. James Porter Davis, of the Division of 
Research and Planning, Acting Division Administrator Collins submitted 
a memorandum on May 29, 1935, to the Executive Secretary of the National 
Industrial Recovery Board outlining his opinion of the next steps to be 
taken in the prison labor field. 

Mr. Collin's suggestions were as follows: 

"1. That the Board submit to the President immediately the 
recommendations as adopted by it at the meeting on Monday, May 27 
with the request that he immediately earmark fifty million dollars 
from --the relief monies now available to carry out such a program. 

"2. That the Board make a definite proposal as to the creation 
of an agency, at the earliest possible moment to initiate, coordinate 
and supervise a program of action, to effectuate so far as may be 
practicable, the recommendations of the Ulman Committee. There is 
attached a suggested draft of an executive order creating the Prison 
Industries Reorganization Administration which may be used if it con- 
forms to the President's views. This order, following that creating 
the Rural Electrification Administration, provides for the appoint- 
ment of an Administrator to head such agency. 

"3. That the Board request the President to ask the Administrator 
of the Federal Emergency Relief Administration to proceed to make con- 
tracts with the Prison authorities in those states where cotton garments 
are now made, and that these contracts be entered into and work under 
them begun with all possible speed. This is particularly necessary now 
and if undertaken will preclude a grand rush on the part of some con- 
tractors to prisons which are now confronted with a great deal of idle- 
ness. It will remove from the open market those products which have 
the worst effect upon goods manufactured by free labor and sold in 
the competitive field. There is attached a schedule recommended by 
both industry, labor and prison authorities as to the amounts which 
will be satisfactory. It is my belief that this is a fair apprasal 



(*) Prison Labor Program File, Former Public Agencies Division, ERA 
9742 



-82- 

except for the state of Kentucky. The estimates there may be re- 
duced. However, this is a matter to be worked out between the 
Federal Emergency Relief Administration and the respective states 
with the cooperation of the ERA and the proposed PIRA. 

"4. That the facilities of the Research and Planning Division 
of the National Recovery Administration be utilized for the survey, 
such surveys to cover: 

"(a) Surveys of the market for state use products among 
the institutions end other tax-supported agencies 
of these states and their political subdivisions 
and surveys which might prepare and recommend. a 
program of state use industries -for these states and 
to aid the respective states -in presenting to the 
Prison Industries Reorganization Administration pro- 
jects for erection of buildings, purchase and instal- 
lation of equipment and other necessary expenditures 
for plants and personnel to establish state use in- 
dustries in the states applying and cooperating. 

" (b) A study of the problem of providing constructive 
activities fo.r idle prisoners and methods of de- 
veloping such activities. 

"(c) Laws effecting prison industries especially in 
States now selling prison products on the open 
market and recommendations as to necessary legis- 
lative work for the establishment' of adequate state 
use laws in s\ich states, This survey will of neces- 
sity require legal research men, and probably. should 
be separate from the other surveys. . . 

"It is feasible that in this survey there can be utilized 
approximately four hundred, white collar relief workers In 
addition to the staff of the Research and Planning Division. 
The latter agency will collate and coordinate all the surveys 
made. 

"5. That contact be made with the prison officials through 
the Prison Labor Authority inviting the latter to cooperate with 
representatives of affected industries with the view of recommending 
programs of diversification and a quota system for all prison industries 
in accordance with the findings of the survey. 

"6. That provision be made for the selection of representatives of: 



t." .'.. c 



a. Prison officials 

b. Industry and Labor 

c. Affected Federal" Agency 



to act in an advisory capacity to the Administrator of the agency es- 
tablished to administer the Prison Labor Pr o gram." (*) 

(*) Memorandum of May 29, 1935, from Linton M. Collins to L. C. Marshall 
Prison Labor File, Former Public' Agencies Division, HRA. 



974-2 



■ 83- 



IX PROPOSED EXECUTIT3 DER ESTABLISHING PHI SOW INDUSTRIES REORG-ANI- 
ZATI ! ADMINI STRATI OB . 

Accompanying A.cting Division Administrator Collins' memorandum 
of May 29, 1925, to the Executive Secretary of the National Industrial 
Recovery Board "Fas a -ororjosed Executive Order prepared for the purpose 
of establishing the Prison Industries Reorganization Administration uoon 
approval and signature "by the President. The proposed Order is as fol- 
lows: 

"EXECUTIVE ORDER 

ESTABLISHMENT OF THE -RISOH INDUSTRIES REORGANIZATION 

ADMINISTRATION 

"By virtue of and pursuant to the authority vested 
in me under the Emergencv Relief Appropriation Act of 
1935, approv-d April 8, 1935 (Public Resolution No. 11, 
74th Congress) , I hereby establish an agency within the 
Government to be 'cr.own as the "Prison Indistries Re- 
organization Administration", thehead thereof to be known 
as th^ Administrator. 

"I hereby prescribe the follo^inf duties and functions 
of the said Prison Industries Reorganization Administra- 
tion to be exercised and performed by the Administrator 
thereof to be hereafter appointed : 

"To initiate, formulate , administer and super- 
vise a program of approved projects with 
respect to replanning and reorganizing the 
existing -orison industry system and -orison 
welf ar • activities of the several states 
and the political subdivisions thereof, with 
the view of replacing such systems by adequate 
state use systems as rapidly as conditions 
may permit: thereby removing prison made 
products from the open market. 

"In the performance of such duties and functions, 
expenditures are hereby authorized for necessary supplies 
and equipment; law books and books of reference, director- 
ies periodicals, newspapers and press clippings; travel 
expenditures, including the expense of attendance at 
meetings when specif icall - aeeth-rized by the Administrator; 
re- tal at the seat oT Government and elsewhere; pur- 
chase, operation and raaintenan.e of passenger-carrying 
vehicles; printing and binding; and incidental expenses; 
and I hereby authorize the Administrator to use the 
services of such agencies of the Federal government as 
may be necessary to carry out + he purposes herein stated, 
to accept and utilize such voluntary and uncompensated 
services, and witn the consent of the State, such State 
and local officers and employe s, and appoint, without 

9742 



-84- 



regard to the provisions of the civil service laws-, such 
officers and employees, as may "be necessary, prescribe their 
duties and responsibilities and without regard to the 
Classification Act of 13.3. r *, as amended, fix their compen- 
sation: Prov ided, That in so far as practicable, the 
persons employed under the authority of this Executive 
Order shall he selected from those receiving relief. 

"For the Administrative expenses of the Prison 
Industries Reorganisation Administration there is hereby al- 
locrted . to the Administration from the appropriation 
made by the Emergency Belief Ar-.ropri'ation Act of 1935 
the sum of $100,00". Allocations will be made hereafter 
for authorized projects." 



The White House, 

June , 1935" (*) 

This proposed Executive Order provided for one he?d of the 
prison Industries Reorganization Administration to.be known as 
"Administrator". According to the plan outlined 1 in the memo- 
randum of May 29, 1335, representatives of prison officials, 
Industry, Labor and any affected Federal Agency would act as 
advisors to the Administrator. This would have given all in- 
terested groups representation. 

On June 15, 1935, the President 'by Executive Order 1T . 7075 
terminated the "National Industrial Recovery 3oard and re- 
organized the National Recovery Administration for the iurpose 
of continuing the administration of the -provisions of Title 1 
of the National Industrial Recovery Act, as amended by Public 
Resolution 23 of the 74th Congress, and created the office of 
Administrator of the National Recovery; Administration. This order 
appointed James L. O'Nei'Ll as Acting Administrator of the National 
Recovery Administration, 

V.' MEMORANDUM OR ACTING DIVISION ADMINISTRATOR COLLINS TO THE 
ACTING ADMINISTRATE OR THE NATIONAL RECOVERY ADMINISTRATION 
. URGING THAT HE PRESENT THE PRISON LABOR PROGRAM TO THE PRESIDENT. 

Acting Division Administrator Linton M. Collins submitted the 
following memorandum to the Acting Administrator of the National 
Recovery Administration on June 20, 1933, in an effort to stimulate 
proposals, to the President regarding the nrison ">rogram. 



(*). Prison Industries Reorganization Administration File, Former 
, . Public Agencies Division, N.R.A. 



9742 



-35- 

11 1. Mr. O'Heill, Dr. Marshall and Mr. Coonley, or 
someono &' lignated "by them should, present tho Prison 
Program to the President and ascertain from hirn whether 
he wants this undertaken at this time, and is willing to 
havo $50,000,000 of relief monies appropriated end 
segregated for the effectuating of such Prison Program. 
This follows up recommendations of the NIHB. Ho thing 
further can he done until this step is taken and 
attitude of President made known. Monies are rapidly 
being allocated and a further delay will be fatal. 

"2. Set up agency or designate authority to 
Public Agencies Division of 1JRA, for accomplishment 
of the Program. 

"3. Contact Mr. Hopkins of FSRA and have his 
agency ma^3 contracts with prison authorities for the 
manufacture of cotton garments for relief purioses in 
accordance with recommendations of Ulman Committee. 

"4. Have Public Agencies Division with assistance 
of Mr. Davis of Research ana Planning Division begin 
immediately to make the necessary surveys, if 
President gives assent." (*) 

VI. CONFERENCE OF UFA EXECUTIVES 01T PHI SOU LABOR QUESTIONS, -JULY 1, 1935 

On July 1, 1955, Messrs. L. C. Marshall , Director, Division of 
Heview, Premiss L. Coonley, Director , Division of Business Coopera- 
tion, Linton M. Collins, Acting Division Administrator in charge of 
prison matters, James P. Davis of the Division of Research and Plann- 
ing and Burton E. Oppenheim, Deputy Administrator in the Textile 
Division, all of HBA, held a conference on the -roblem of prison labor 
competition. The following statements represent the concensus of 
opinion af those present according to 2 memorandum of July 1, 1935 
from the Director of the Division of Business Cooperation to the 
Acting Administrator: 

"1. It is highly desirable that some constructive 
program alon^ the lines recommended by the Ulman Committee 
and approved in principle by the national Industrial 
Recovery Board on May 27, 1935, be inaugurated. 



(*) Prison Labor Program File, Former Public Agencies Division, 
NRA Memorandum of June 20, 1935, From Linton M. Collins to 
James L. 0' Weill. 



Q7A? 



742 



-86- 

"2. It appears that only the President and his 
advisers can decide as to whether this can and should 
be done with funds from the Work Relief Appropriation. 

"3. If Federal funds are to "be allocated for this 
purpose an independent agency should he set up to make 
surveys, develop and coordinate projects and supervise 
the expenditure of the funds provided. 

"4. The definite ear-marking of a substantial sum 

such as the $50,000,000 proposed by the Ulman Committee 
is necessary to insure state cooperation. 

"5. The supervisory agency should have the active 
cooperation of ?dvisory committees representing industry, 
the prisons and the affected Government agencies. 

"6. Since the Prison Labor Authority and industries 
affected by Prison Labor Competition have been pressing 
the HRA for advice, the Acting Administrator of the NBA 
should be requested to present the statements hereinabove 
noted to the President for final determination on the 
f o 1 1 o wi ng b a s i s : 

"A. The President should be asked if he- is 

favorable to the ear-marking of funds for 
the promotion of the i; state use" system 
in prj sons and the removal of prison pro- 
ducts from open competitive markets. If 
he is not favorable, the matter can be 
dropped. 

"B. If the President is favorable inclined 
toward this matter, he should be asked 
to obtain advice ^s to whether this can 
and should be done with funds from the 
Works Relief Appropriation. If the Presi- 
dent determines, after proper advice, that 
the funds cannot he so used, the suggestion 
of the Ulman Committee must be abandoned. 

"C. If such funds can be used, it is recommended 
that the President set up an independent 
agency to make surveys, develop and coordinate 
projects and supervise the expenditure of 
funds ■'•irovided. Such agency should have the 
active cooperation of advisory committees 
representing industry, the irisons r-nd the 
affected Government agencies." (*) 



(*) Prison Industries Reorganization Administration Pile, 
Former Public Agencies Division, 1T.R.A. 



9742 



-87- 

VII. MEMORANDUM OF DIVISION ADMINISTRATOR COLLINS TO PRENTISS COONLEY, 

DIRECTOR, DIVISION 0? BUSINESS COOPERATION. 

On July 23, 1935, Acting Division Administrator Collins again 
attempted to expedite action on the Prison Labor Program by sub- 
mitting a historical review of the Compact and its operations under 
the N.R.A. This review is in the form of a memorandum to Mr. 
Coonley. The memorandum further points out that steps should he 
taken to present the national Industrial Recovery- Board's action 
of May 27, 1935, to the President and ascertain from him whether or 
not he desires that the proposed program he encouraged. If the 
President looked upon the program with favor it was necessary that 
an agency he 'set up to carry out the program; While this program 
was being instituted it was felt that relief for the Cotton 
Garment Industry could be obtained by the FERA, talcing over cotton 
made prison garments for relief ;urr oses so that the same would 
be removed from the public market as recommended by the UTman 
Committee. (*) 

VIII. EXECUTIVE ORDER 7194 ESTABLISHING PRISON INDUSTRIES REORGANIZA- 
TION ADMINISTRATION. 

Mr. Prentiss Coonley, Director of the Division of Business Co- 
operation, conferred with the President concerning the prison 
program early in September 1935. Shortly following this conference, 
Executive Order No. 7194 was issued establishing an agency within 
the government to be known as the "Prison Industries Reorganization 
Administration". The order specifies that "the governing body of 
the Prison Industries Reorganization Administration snail be a 
Prison Industries Reorganisation Bo~id consisting of five members to 
be appointed by the President and to hold office at his ■ pleasure." 
This Board is authorized to prescribe such rules and regulations and 
to delegate to its agents and representatives such powers, as, in 
its discretion, it shall deem necessary and proper for the performance 
of the duties and functions of the Prison Industries Reorganization 
Administration and for effectuating the purposes of the Order. 

The duties and functions prescribed for the Prison Industries 
Reorganization Administration are set forth in the Executive Order 
itself. (*) 



(*) Appendix No. 1 Memorandum of July 23, 1S35 from Linton M. Collins, 
to Prentiss Coonley, Prison Industries Reorganization Pile, Former 
Public Agencies Division, IT,R.A. 

(**) Appendix No. J - Executive Order Ho. 7194 



9742 



-88- 

In addition to differences in minor details this Order differs 
essentially from the proposed Administrative Order recommended "by the 
Acting Division Administrator in charge of the Prison Compact in that 
it provides for a governing Board of five members rather than an 
Administrator. 

The establishment of the Prison Industries Reorganization' Board 
by the approval of the President of Executive Order Ho. 7194 on 
September 26, 1935, terminated official action of the ilational 
Recovery Administration with respect to the prison labor problem. 
The Prison Industries Reorganization Administration was thereafter 
responsible for the carrying forward of the constructive attack on 
the problem originated by the National Recovery Administration. 



9742 



-89- 

CHAPTER VIII 
ADMINISTRATIS' OF PRISON LABOR COMPACT 

I. N.H.A. PERSONNEL. 

From the time the National Recovery Administration received the 
proposed Code of Fair Competition for the Prison Industries to December 
3, 1933, practically all -orison matters presented to the N.R.A. were 
referred to Mr. John M. Keating, Assistant Counsel who was the N.R.A. 
official whom industry and prison representatives consulted and advised 
with in formulating the Compact. 

After Mr. Keating resigned from the N.R.A. the Prison Labor problem 
was handled principally by Mr. Howard E. Wahrenbrock, Assistant Counsel, 
up to April "33, 1934. In a few cases Mr. Wahrenbrock was assisted by 
other members of the Legal Division during this time, but these assistants 
worked Tinder his instructions and guidance. 

On 'April 23, 1934, Mr. Linton M. Collins was appointed Deputy Admin- 
istrator in charge of the Prison Compact, and Acting Division Adminis- 
trator of Division Eight. Mr. Collins continued in this capacity until 
August 20, 1935, when he resigned from the National Recovery Administration. 
During the time he had charge of the administration of the Prison Compact 
he was assisted by the following: V. J. Clarke, Senior Assistant Deputy 
Administrator; Howard E. Wahrenbrock; Sydney R. Prince, Jr., Peter Seitz; 
William Wise and Spencer Pitts, Assistant Counsels and Legal Advisors; 
James Porter Davis, Research and Planning Advisor; Miss Rose Schneidermann 
and Sidney Hillman, Labor Advisors; Mercer S. Johnston and Stacey May, 
Consumer Advisors; Jonathan Chace, Dexter A. Tutein and C. L. Heyniger, 
Industrial Advisors. 

II. PRISON LABOR AUTHORITY PERSONNEL. 

In addition to the three Presidential Appointees and the duly elected 
members of the Prison Labor Authority (*•) this Authority employed Mr. 
Howard B. Gill as Economic Advisor. Mr. Gill acted in the capacity of 
a managing agent for the Authority as well as Economic Advisor, and 
supervised the headauarters office in Washington, D. C. Prior to his 
appointment by the Prison Labor Authority to this position in May, 1934, 
he was Superintendent of the State Prison Colony at Norfolk, Massachusetts, 
for six years. (1928-1934). Before 1938 he neld the following position 
with the United States Government. 

1925 - Special Investigator of Prison Industries, United States 

Department of Commerce. 

1926 - Purchasing Agent, United States Department of Justice. 

1927 - Chief Investigator of Prison Studies, United' States Bureau 

Department of Efficiency. 

(*) Chapter III, Section III, Election of Formal Prison Labor Authority, 
ante. 

9742 



-90- 

With this back-ground it "as recognized that the Authority left the actual 
management of its affairs, subject to their ap-nroval, in the hands of a 
man who had considerable experience from the standpoint of managing -orison 
industries, investigating penal institutions and -Durchasing fcr such 
institutions. 

III. EFFORTS OF N.R.A. OFFICIALS TO COORDINATE OBJECTIVES OF THE COMPACT 
WITH PRISON LABOR AUTHORITY AMD AFFECTED CODE AUTHORITIES. 

The major problem N.R.A. officials encountered in seeking to obtain 
compliance of the terms of the Prison Compact was that of reaching satis- 
factory voluntary agreements between -orison manufacturers and free industry 
manufacturers with respect to establishing charges for labor and overhead 
in an effort to arrive at prices for which prison goods could be sold and 
conform to the provisions of Article V of the Compact. The provisions of 
this Article are as follows: 

"ARTICLE V" 

"Section A. -- Prison products, when sold by the -orison or 
through a. contractor, whether sold direct or through any agency, 
shall be scld not lower thftn the fair current price prevailing in 
the market 5n which -che product is customarily sold — to whole- 
salers, ret?ilers : or consumer'- as the case may be." 

"Section 3. — Ho peral or- correctional institution or agency 
thereof shall enter into -jiy ccbt&p.t for the labor of prisoners 
which does not insure a returii irom the contractor to the state or 
its political subdivision and/or the prisoner of an amount eaual 
in value to the cost Der unit of product for labor and overhead 
necessarily paid in competing domestic private industry on the 
comparable product: Provided, that the imposition or collection 
of such amounts or charges stall not be such as will requre the 
sale of urison products at a higher price than specified in Section 
A hereof. " 

In order to determine '"hat these prices shonld be it became necessary 
for the Prison Labor Authority and Representatives of the various Code 
Authorities affected by -orison competition to meet and review their costs 
in an effort to arrive at some favorable decision. In .most cases where 
this was done the results were beneficial to both groups and fair prevail- 
ing prices fcr the prison products were agreed unon. However, the diffi- 
culty would arise when labor rates and the cost of raw materials would 
change in a given area. These changes would materially effect the prices 
at which the goods would be sold to wholesalers, jobbers, retailers or 
whomever the purchaser might be, and because of these changes, especially 
if the prices were lowered, other competitors in the market would rush in 
and complaon about the unfair -oractices that were carried on by the prisons 
and how these prices were demoralizing their respective markets. Especially 
was this true in the case of the Cotton Garment and Binder Twine Manu- 
facturing Industries. Nevertheless the Prison Labor Authority was con- 
tinually attempting to hold its orison manufacturers in line and in most 
cases were successful until so.ne free industry manufacturer would cut 
his -orices. Then the Prison Labor Authority would authorize their insti- 
tutions to meet such -orices. This, of course, resulted in continual 

9742 



-91- 

complaint and dissatisfaction on the part of both groups. However, as 
the Cotton Garment Manufacturing Code and many others contained no nrice - 
fixing provisions, the only way to adjust these differences was through 
conferences with the affected Code Authorities as provided for in Article 
VII, Secticn 2 (d) of the Compact which is as follows: 

"To determine, after conferring with the Code Authority of 
the Industry affected, and upon reauest of any persTi or firm affected, 
the prices, charges and amounts nrovided for in Article V, Section A 
and 3 hereof; such determination to be subject to aD"oeal to the Pres- 
ident of the United States. In establishing fair current prices, 
charges and amounts, the Prison Labor Authority shall take into con- 
sideration all factors necessary to insure the marketing of prison 
products on a fair competitive basis. It may consider, among other 
factors, the extent to which monopolistic -practices exist in any trade 
or industry in which the prison industry operates, the degree to which 
prison products may be discriminated against, the ability of the 
prison industry tc a.djust its operations and production to meet 
changing styles, designs, and/or other conditions beyond its control, 
and any restrictions placed upon the marketing of prison products. 
The fair current nrice may net be such as will effectually prevent 
the sale of prison products or destroy existing markets, nor shall 
it permit the sale of -orison products at such -nrices or in such 
manner or in such quantities as will depress the standards, wages or 
working conditions of the competing private industry or defeat the 
purpose sought to be obtained through adherence by a competing 
private industry to a code of fair competition under the National 
Industrial Recovery Act." (*) 

Continual effort was made by the 1T.R.A. Officials charged with super- 
vision of the administration of the Compact, to see that fair decisions 
with respect to the various questions presented were arrived at wherever 
possible. As an example of this effort to assist those interested in 
arriving at such decisions the following take'n from the minutes of the 
Prison Labor Authority Meeting of October 16, 1934, indicates the attitude 
of the Deputy in charge on problems which require fair and honest admin- 
istrative judgment. 

"Mr. Collins discussed the -orice policy adopted by the Prison 
Labor Authority and expressed his approval of it -providing the Prison 
Labor Authority was willing to change its authorization of minimum 
prevailing prices whenever it was shown that competing firms whose 
prices were used as a basis for determining such minimum prices, were 
not complying with code provisions." 

The -oricp policy referred to in this statement is quoted in Chapter 
III, Section VI of this report. 

The Prison Labor Authority was unable to accomplish a great deal with 
respect to encouraging the various states signatory to the Compact in 
diversifying their -orison industries. Although the Compact gave the Auth- 
ority the power tinder Article VII, Section 2-(f)-l to - 

"formulate such regulations as may be consistent with statutory 



9742 



(*) This re-oort does not attempt to discuss the legality of 
such conferences. 



Provisions and as may be necessary to assure a diversification of 
the output of prison industries in fair proportion to the production 
of the industries affected. " 

Undoubtedly the action of the Prison Labor Authority in establishing 
by agreement minimum charges for prison made. products resulted in some 
curtailment of the sale of such goods on the open market. However such 
statistical information as was collected by the National Recovery Admin- 
istration by means of a questionnaire (*) sent out early in 1934, is 
inadequate for the ourpose of drawing conclusions as to the extent of 
curtailment. 

Many complaints which were filed with the H.H.A. against prison 
competition, were of a general nature in that the complainant would write 
or wire in objections to the activities of some particular prison with 
respect to the manner in which said prison was disposing of its goods, 
alleging the goods \vas going onto the public market at prices unfair to 
free industry. However, in many instances when the complaint was traced 
down it would develop that some other free industry competitor had lowered 
his price on the given commodity and as a result the -orisons were forced 
to meet this lowered price in order to dispose of their products. This 
happened many times when the code which both free industry competitors 
were operating under did not contain price fixing provisions and both 
were living up to their codes in other respects. This method of meeting 
competition was looked upon as unfair. However, when free industry could 
not control its own members through the Code Authorities, it was felt 
that the prison people could hardly be expected to restrain their members 
with respect to such sales. This was especially true in the Cotton 
Garment Trade. 

In the State of Minnesota There the state prison manufactures farm 
machinery for sale to the public, many complaints were filed with the 
N.R.A. regarding the prices at which these products were being placed 
on the open market in that State. Upon investigation it was found that 
the legislature of the State of Minnesota, in 1933, passed a statute which 
provided that the maximum price of machinery made in the State Penitentiary 
for the calendar years 1353, and 1934 should not exceed 80 c /o of the average 
price charged in 1932. (**).7or 1932 the maximum price was set by statute 
in the 1931 State Legislature. This statute in substance is as follows: 

"That for the calendar years of 1931 and 1932 the maximum price 
charged to wholesalers, retailers and selling agents within the 
State of Minnesota for agricultural machinery of all kinds manufac- 
tured in the state prison should not exceed 85fi of : the average price 
charged for similar items of such machinery sold in similar quantities 

to such wholesalers, retailers or selling agents during the year 1930. " 
( *** ) 

As the Minnesota State Prison was the only prison engaged in the 
manufacture of farm machinery subject to the Compact, this problem was 

(*) See Pago 153 of This Report. 
(**) Chapter 343, 1933 Session Laws- Minnesota. 
(***) Chapter 340, 1931 Session Laws - Minnesota. 



-93- • 

confined solely to that State. However, such legislation did have a 
demoralising effect uoon the Farm Eouipment Manufacturing Industry, 
hut as these sales were controlled "by & state statute, it was a matter 
beyond the control of the National Recovery Administration. 

After Linton M. Collins was anointed Deputy Administrator in charge 
of the Prison Compact all -orison matters with respect to provisions of 
Codes of Fair Competition were to be handled through his office either 
by himself or his assistants. In the main a goodspirit of cooperation 
existed between other Deputies in charge of industrial and agricultural 
codes and Division Eight. A few tiies those in charge of industrial codes 
would look with favor upon some proposed provision which would have re- 
sulted in hardship to the Prison Industry effected, but these generally 
fail©d for want of formal approval. On June 5, 1934, Order No. 303-5 
titled "Code of Fair Competition for the Cordage and Twine Industry 
aporoval of Application for Exemption of the Binder Twine Manufacturers 
from Schedule B" was issued. This Order was actually an exemption from 
Schedule B of the Binder Twine and Cordage Code and granted permission 
to manufacturers of binder t^ine to dispose of their twine at prices 
other than those stated in their price list, provided that detailed in-. 
formation concerning all such sales be reported iinmediately to the 
Code Authority. The stay w s to be effective until August °8, 1934. This 
was one order which went into effect some time before the prison people 
had any knowledge of its approval and resulted in permitting the free 
industry binder twine manufacturers to lower their nrices and sell their 
twine before the Prison Labor Authority knew anything about the authorized 
change in price policy. This was Tie of the few times when administrative 
action was taken which seriously affected the prison industries without 
the Deputy in charge of Prison Industries being informed. Usually when 
objectiens were filed by the Prison Labor Authority, an opportunity would 
be given the Prison people to enter their objections formally after the 
issuance of a temporary stay so that opportunity would be given everyone 
interested to be heard. 

IV. LESAL ASPECTS OF THE COMPACT. 

During the formulative period of the Prison Compact in the fall of 
1933, those who assisted in drafting the Compa.ct provisions, as well as 
those who signed it as officials of their respective states did not 
formally consider the legal aspects of such a working agreement. The 
purely legal phases of the instrument were never given very serious con- 
sideration as it was recognized each institution was regulated by the 
statutes of its respective state and the Compact was entered into volun- 
tarily with the spirit of cooperation in an endeavor to assist in effect- 
uating the policies of Title I of the National Industrial Recovery Act. 

In a file co-ny of a letter of September 4, 1934, to Professor Burke 
Shartel, of the Michigan Law Revie", from James V. Bennett, Assistant 
Director, Federal Bureau of Prisons and. Secretary-Treasurer of the 
Prison Labor Authority, are t is, o paragraphs which briefly state Mr. Bennett's 
understanding of the legal aspects of the Prison Compact. 

"You understand, I presume, that the Prison Compact, so far, 
is merely a voluntary arrangement between the states and has no 



>742 



-94- 

legal status 1 other than that derived from the National Recovery Act. 
I think that' Practically everyone realizes that the Federal Govern- 
ment has but little authoritative jurisdiction over the states in 
this matter, , out it can and does help us to enforce the provisions 
of the Compact by invoking -nosers vested in it ov*r other industries. 

"Our 'Compact is implemented by the clause in the Retail Code 
which prohibits the sale on the open market of prison-made goods 
not ma.de under its terms. In other i"ords, if the State of Michigan 
should be declared a violator of our Compact, the Retail Code Auth- 
ority would immediately forbid any of their members from selling 
the products of the State of Michigan. There are also other clauses 
in certain of the other Codes which help us to enforce our C ompact. 
It is, however, admitted .that with regard to certain products, the 
Compact cannot legally be enforced under present conditions. To ci + e 
an example; Minnesota manufactures a large amount of binder twine 
which it sells directly to the farmers or through farmers' unions 
and coopera.tors. If Minnesota should violate our Compact it is very 
doubtful that we could prevent the sale of its Products because no 
N.R.A. Code applies to, these agencies." (*) 

In response to an inouiry of Acting Division Administrator, Linton 
M. Collins, relative to the legal validity of the Prison Labor Compact, 
to Assistant Counsel Peter Seitz-, a memorandum •- w c s submitted which in 
substance is as follows: 

"This memorandum is not intended to be a thorough nor exhaustive 
legal analysis of the validity of the Prison Labor Compact. It merely 
represents a precis of several legal arguments which come to mind 
on the subject. A definitive legal opinion would reauire a thorough 
study of the following aspects of the problem." 

"1. The nature of state compacts. 

"2. Whether Congress may delegate authority to consent to 

state compacts expressly granted in Article I, Section 10 
of the Constitution to the Executive Branch of the Govern- 
ment. 

"3. Whether the National Industrial Recovery Act contains such 
delegation of authority. 

"4. Whether a state compact is an "agreement" under Section 
4(a) of the National Industrial Recovery Act. 

"5. If so, whether a. compact is such an agreement, if it fails 
to contain the mandatory provisions of Section 7(a) of the 
National Industrial Recovery Act. 

"6. Whether a state compact signed by governors wardens of 
state ririsons, commissioners of correction, etc., on 
behal f of the signatory states, without supporting state 

T*) Prison Labor General File "B", August to" December, 1934. 
3742 



-95- 



legislation adopting or anproving the conpact or 

making its provisions the law of the state is duly 
signed by the state and enforcible against it." 

" A. State compacts require the consent of Congress * 

Article I, Section 10, Clause 3 of the Federal 
Constitution reads in part as follows: 

"Ho State shall, without the Consent of 
Congress,*** enter into any Agreement or 
Compact with another State, or, with a 
foreign power***" 

11 B. It is doubtful 'The the r Congress nay delegate 
its no rT er to give such consent. 

There is a well recognized "body of lair -to the 
effect that Congress may delegate to the Execu- 
tive Branch of the Government its power to make 
rules and regulations even when the use of such 
power involves exercise of considerable degree 
of discretion. It is doubtful, however, whether 
a delegation can be made under a clause of the 
Constitution which specifically requires the 
consent of Congress. Delegation ha.s usually 
been effected under broad and general clauses, 
such as the Commerce clause." 

" C • The Hati o nal Industrial Recovery Act does not 
contain any Dele, . -at ion of Congre s sional -lower 
to consent to Compacts to the Executive and 
t he CoiTj a ct is no t an Agreement within the 
meaning of the national Industrial Recovery 
Act. 

Assuming (without conceding) that a delegation 
of authority to approve Sta.te Compacts may be 
made by Congress to the President, in this in- 
stance it must be made by the national Indus- 
trial Recovery Act, which is cited in the Pres- 
ident's Order of Approval of the sa.id Compact, 
approved April 19, 1934, Section 4-a of Title 
I of the IIIRA provides that: 

"The President is authorized to *** 
approve voluntary agreements between 
and among, persons engaged in a trade 
or industry, labor organizations, and 
trade or industrial organizations, as- 
sociations, or groups relating to any 
trade or industry, ****". 



9742 



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Let us assume further that the States engaged in 
Prison industries are persons or groups within 
that meaning of Section 4<a; out is the Compact 
an agreement within that Section? Section 7-a 
reads as follows : 

"Every Code of Fair Competition, agree- 
ment and license apprcved s prescribed 
or issued nndef this title shall con- 
tain the following conditions: ,(l) 
That employees shall have the right to 
organize and "bargain collectively ***** 
etc". 

Obviously a compact relating to the regulation of 
Prison industries cannot contain the provisions 
set forth in Section 3-a, required in all agree- 
ments which may he approved under Title I of the 
Actc In ray opinion this Section must he read in 
connection with and is a limitation upon Section 
4~a>-. In other words the agreements, which the 
Fresident may approve under Section 4-a, are those 
which contain provisions set out in Section 7-a. 
The present compact aontains no such provisions. 
The conclusion must follow that the ITIRA cannot be 
relied upon as a basis for the authority of the 
President (delegated by Congress) to approve the 
Compact." 

"D. Th e Prison Labor Compac t may n ot have been 'properly 
exec uted ., 

The signatures of the sever; 1 States affixed to the 
Compact were subscribed by Governors, Wardens of 
State Prisons and State Commissioners of Correction. 
In only one instance (Kentucky) was there State Legis- 
lation in support of the Conpacto Ho definite rules 
are set forth in the Federal or State Constitutions 
as to the procedure to be followed in subscribing the 
signature of a State to a Compact. However, it is 
considered to be the better rule to require State 
legislation adopting the act of its agents in signing 
the Compact and providing that the provisions • of the 
Compact are the laws of the State." 

"A further inquiry is being made into this subject and I 
will report to you as soon as it is completed." (*) 



(*) Prison Labor General Pile "3",' August to December, 1934, Memoran- 
dum Dated December 1, 1934, 



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From this nenore.nd.imi it is evident that the Compact lacks validity for 
reasons of the points raised and answers contained therein. Attached 
to this report is Appendix K and supplement (*) which are two memoranda 
of December 4, 1934, and December 7, 1934, respectively from Assistant 
Counsel Peter Seitz, to Associate Counsel, Jack Garrett Scott. These 
memoranda quite clearly establish the Assistant Counsel's views on the 
legal questions involved. After study and analysis it is apparent to 
the reader that the Prison Compact was merely a voluntary working 
arrangement by the States Signatory thereto and the National Recovery 
Administration, to carry out the objectives of the national Industrial 
Recovery Act so far as was possible under existing circumstances. On 
May 14, 1935, I.Ir. Israel Packel, Assistant Counsel, Legal Research, 
N.R.A. , submitted a memorandum on the Federal Regulations of Prison Labor 
Products. (**) This memorandum deals with various phrases of the prison 
labor problem. The following question was prepared and conclusions were 
reached: 

" Ques tion: To what extent nay the Administration 
regulate the use of orison labor or its products 
and to what extent can immunity from such regula- 
tion be claimed oi-r the State or its contractors 
as governmental agencies?" 

" Conclusions : 1. The interstate movement of pri- 
son made goods may be regulated by way of pertinent 
code provisions. 

2. The production of state prison goods and their 
consumption by the state itself may not be regu- 
lated. 

3. The -production of state prison goods even though 
they are eventually sold in the state is a govern- 
mental function, immune from regulation. 

4. The sale of prison made goods by the State is 
so incidental to the production that it also is 
probably a governmental function. 

5. Contractors who deal with the State may be re- 
gulated, so long as the regulations do not discrim- 
inate, interfere with or impair the right of the 
state to sell the goods. " 

These were transmitted to I.ir. Jack G. Scott, Associate Counsel, 
1J.R.A. by Mr, H, E. Wahrenbrock, Assistant Counsel, II. R. A. Hay 22, 1935. 



(*) Appendix Ho. K and Supplement. • 

(**) Prison Labor, Legal Division Piles, tf.R.A. Legal Research V.o . 864. 



9742 



V. IIITEBPHETATIOilS. 

On July 20, 1934, the Interpretation Committee of the Cotton Garment 
Code Authority issued the following ruling ruling: 

"YThen a manufacturer employs convict lahor in the 
production of cotton garments and also employs free help, 
such as office employees, foreman superintendents,, ship- 
ping clerks, etc, in connection with production of said 
garments, these latter employees and this manufacturer, 
insofar as -orison production of cotton garments is con- 
cerned, is subject to the jurisdiction of the Cotton Gar- 
ment Code, However, such a manufacturer is not entitled 
to the Cotton Garment Code Authority Label for such gar- 
ment." 

This interpretation was submitted to the IT. I.. A. and in a letter dated 
August 6, 1934, the: Cotton Garment Code Authority was advised of ap- 
proval as follows: 

"This rulinr in question 76, tia&e 3 of the Ilinutes 



of the Interpretation Committee of July 20, is hereby 
approvedc" 

On October 16, 1934, the Prison Labor Authority voted the following re- 
solution: 

"All goods produced, in whole or in part, in the 
prisons as defined in Article 1 of the Compact come under 
the sole jurisdiction of the Prison Labor Authority, hence 
the prison contractors insofar as they produce or distri- 
bute such )roduots are under the cole jurisdiction of the 
Prison Labor Authority^" 

The Prison Labor Authority contended that under the provisions of 
Article I of the Compact they should have sole jurisdiction of this class 
of employees becuase the Compact specifically states in that Article in 
the l,\.st sentence which defines the word product that "'product' shall 
mean all goods, wares, merchandise and minerals manufactured, produced or 
mined, in whole or in part by prison industry for other than State Use." 

After receipt of the above resolution by Division Eight, the matter 
wos referred to the Legal Division for action. Pending a decision briefs 
were filed with the IT. R. A. from both the Prison Labor Authority and the 
Cotton Garment Code Authority each supporting the contention that they 
should have jurisdiction over such employees in question. Hoirever, on 
December 28, 1934, .~r, Clarence I. Blau, Assistant Counsel submitted, a 
memorandum to Mr. Janes C. Worthy, acting Assistant Dervuty Administrator 
of the Apparel Section of IJ.R.A. , which states as follows: 



9742 



-99- 



"I hr.ve your memorandum of December 26, 1934. Clearly, 
LIr. Clarke is correct. If the Prison Labor Authority has 
jurisdiction over the -products, it is difficult to see how 
the Cotton Garment Code Authority can have jurisdiction of 
i)?rt of the working conditions. 

"I have discussed this letter T7ith the Assistant Counsel 
assigned to the Prison Labor Compact. He feels that it may 
be lossible to work out some agreement ^oj which the Prison 
authorities will see that free labor employed under the con- 
ditions described in adequate cnmoensa.ted. He, however, feels 
that this matter must be handled through the 'Prison Labor Au- 
thority and not through the Cotton Garment Code Authority in 
view of the rather delicate relationship between the Cotton 
Garment weo-ole and the Prison Labor people." (*) 

Thereafter, it "as considered that free labor employed by contrac- 
tors operating in state orisons -ere subject to the jurisdiction of the 
Prison Labor Authority insofar as working conditions were concerned 
rather than the Cotton Garment Code Authority. However, there appears 
to be no reason why employees of free labor working in a state prison for .339- 
contractors should not have complied with the - r pr;e t hour and general 
labor provisions of the corresponding free industr - -- codes as to such 
labor. (**) 

Another interpretation was proposed ~o~j the Cotton Garment Code Auth- 
ority which would in effect place all -orison contractors under the Cotton 
Garment Code Authority. An opinion o.i this proposal "as given on April 
11, 1935, by LIr. Clarence I. Blau, Assistant Counsel, N. R.A. , as follows: 

"I do not think that the" interpretation requested is 
legitimate. Hor do I think that the result desired can be 
legally achieved through amending the Code. I do not think 
that we can indirectly control the activities of a. sovereign 
state in the conduct of its penal institutions by making one 
who contracts with such state a member of a competing free 
industr;-. It would seem that if we can regulate by Cole 
procedure the relationship between one who contracts with 
the prison and the prison, we can indirectly regulate the 
affairs of the sovereign state in derogation of its con- 
stitionally reserve powers. 

"If I am wrong in this, I think it is certainly clear 
that a different type of an amendment should be proposed than 
the one suggested by the Cotton Garment Industr-/. This amend- 
ment obviously conflicts with other parts of the Code structure. 
For example, the Code apparently prohibits cutting oy a con- 
tractor. The definition of "manufacturer" at the ore sent time 
is so worked as to take account of that wrohbition. If the 



(*) Prison Labor Interpretation Pile. 

(**) Letter dated June 10, 1935, 'from V. J. Clarke, to J. V. Bennett, 

Prison Labor Interpretation Pile. 
9742 



-100- 

amendment were approved that would m longer "be the case. 
Further, r those who enter into contracts with prisons would, 
if this amendment were approved and interpreted in the way 
in which the Cotton Garment' Code Authority desires, be com- 
pelled to place Cotton Garment Code Authority labels on 
their merchandise. That would certainly bo in conflict with 
the desires of the Code Authority, if one can assume that 
they have not completely reversed anything that they have 
stood for for the last year or so. (*) 

This question was raised by Mr. Raymond tfalsh, Counsel for the Cotton 
Garment Code Authority in a letter to D. C-. Edwards, Division Adminis- 
trator, Textile Division, IT.il.A. , >'f August 23, 1934. Likewise, on 
September 10, 1934, the Prison Labor Authority joined in a similar re- 
quest of the 1I.H.A. on the sane question and submitted reasons why they 
felt that such contractors should be under the jurisdiction of the Pri- 
son Labor Author it"/. (**) 

VI. STAYS 

In addition to the stay of Administrative Order Ho. V-2 referred to 
previously in this report (Chapter IV, Section VI), the Cotton Garment 
Code Authority acquired approval on October 15, 1934, of an Or~er propos- 
ing to amend the Cotton Garment Code by including. the following as a fair 
trade practice provision of that Code: 

11 Section PI. Shipment of Prison iladc Goods . 
No member of the industry shall ship any merchandise or 
goods manufactured by prison labor into any State where 
the sale of said goods is prohibited or, restricted by 
State law, and in the event that State laws shall require 
other conditions such as branding, then the same member 
of the industry shall conform with all of the local re- 
quirements o." the particular state." 

The Order of Approval contained a ten day stay affording an opportunity 
for interested persons to file objections. Pending this ten day period 
the Prison Labor Authorit3r filed a formal protest against the inclusion 
of such a provision in the Cotton Larment Code. The protest was based 
on the following: 

1. The Prison Labor Authority had not been consulted in 
regard to -oroposed provision although it pertained to 
prison made goods. 

2. The enforcement of the provisions would result in dis- 
criminatory action against a few -prison factories. 

3. Such a clause would place in the hands of the Cotton 
Garment Code Authority the police power which right- 
fully belong to the states themselves, without giving 
them the responsibility for enforcing the law uniformly 

in all industries. 

(*) Prison Labor Interpretation Pile. 
(**) Prison Labor Interpretation Pile. 

9742 



-101- 

In a memorandum of August 25, 1934, from Mr. Horward E. Tfahrenbrook, 
to Linton il. Collins, the following is stated with reference to the 
above order of October 16, 1934* 

"In my opinion the -provision is illegal, it is not in 
accord with U.S.A. policy and should, in no event, irrespec- 
tive of questions of legality and policy, become effective 
without an opportunity for the prison Industries affected to 
be heard." 

The result was the Order was never put into effect. (*) 

VII. PRISON IHDUSIHIE3 STATISTICS AS COMPILED 3Y. N.R.A. 

Luring January and February, 1935, the Public Agencies Livision of 
the N.R.A. , pursuant to a request of the National Industrial Recovery 
Board initiated a set of prison industry questionnaires which was sent 
out to all of the states in an effort to obtain adequate information re- 
lative to various phases of prison production, employment, and the sale 
of prison products by the respective states. This was done with the objec- 
tive of establishing a. quota-system for ail prison industries limiting 
their oroduction for the open market at a ?;oint no greater than tha.t which 
existed at the time the Compact came into existence. 

The Public Agencies Livision obtained some information from 31 states 
and the Listrict of Columbia upon the return of these questionnaires. 
However, as the Administration did not, from the questionnaires, obtain 
complete information regarding each state institution, even in these 
states, no general conclusions can be drawn from the information in com- 
parison with that published by the United State Lepartment of Labor in 
Bulletin No. 595 of 1S32. 

VIII. PRODUCTS RECEIVED BY THE N.R.A. AGAINST TIE USB OP PRISON LABOR 
ON THODUCTS TO BE SOLE III TIE OPEII MARKET. 

In addition to the protests referred to previously in this report 
relative to the use of convict labor in the manufacturing of cotton gar- 
ments, binder twine, farm machinery, etc., by their respective Code Auth- 
orities, the following entered similar protests at various times with the 
N.R.A.: "Union-Made Garment Manufacturers Association of America, National 
Association for Hen's Shirts and Boy's Blouse Contractors, Southern Gar- 
ment Manufacturers Association, National Work Shirt Association, Fabri- 
cated Metal Products Manufacturing and Metal Finishing and Metal Coating 
Industry, Central Trades end Labor Union of St. Louis, the Sp.aide Shirt 
Company, She Marking Device Industry, etc."(**) Besides these there are 
minor protests from individual members of industry, all of which are 
matters of record in the Prison Labor Files. 



(*) Prison Labor General File - August to December, 1934. 
(**) Prison Labor Files, Protests — Complaints. 



9742 



•102- 



IX. ^COOPERATION BY OTHER GOVERNIEEITTAL DEPARTLiENTS AND NATIONAL 
ASSOCIATIONS VI TH N.R.A. IN ADLIINISTDRiNG THE COMPACT. 

t 

Other Governmental Departments and national Associations nho co- 
operated Trith the National Recovery Administration in vrorking out pro- 
blems encountered in the administration of the Corcpact we're: 

United Sta.tes Department of Labor 

United States Department of Agriculture 

United States Department of Justice — United States 
Bureau of Federal Prisons. 

United State Department of Commerce 

United Stated Federal Emergency and Relief Administration 

National Committee on prisons and Prison Labor 

The American Federation of Labor 

Federated Vomens' Clubs of America. 



9742 



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CHAPTER IX 
EF FECT A1ID CONCLUSIONS 

I. STABILIZATION OF PRICE STRUCTURE. 

The Compact as approved by the President, April 19, 1934, and ad- 
ministered by the States Signatory through the Prison Labor Authority and 
the 1I.R.A. , did eliminate to a large degree the "burdening of the public 
market with prison goods manufactured, mined or processed under unfair 
competitive conditions. Article "V of the Compact was the provision which 
made it a violation for prisons, contractors, or selling agencies to sell 
prison products at prices lower than the fair current price prevailing 
in the market where the products were customarily sold. However, it "be- 
came the duty of the Prison Labor Authority, under the provisions of 
Article VII, Section 2,(d) of the Compact, after conferring with the af- 
fected free industry code authority, to determine the prices, charges and 
amounts necessary to establish the fair current price prevailing .in the 
market where the goods were customarily sold. It was these two provi- 
sions which afforded the greatest net return to free industry of all of 
the elements of the Compact, When the Cotton Garment, Binder Twine or 
other affected code authorities would sit down with the Prison Labor Au- 
thority and arrive at a fair amount for labor and overhead to be charged 
against prison made goods before such goods entered the public market, 
the result was generally a better understanding of the corresponding 
industry -oroblem which tended toward a stabilization of the prices 
which each would charge for like services and costs. In addition, agree- 
ments on price differentials and discounts, whether legal or not, aided 
materially in establishing a price structure which could be agreed upon 
by affected parties. 

While a review of the files on this subject reveal that there were 
many complaints with respect to both the prisons and free industry sell- 
ing goods at lower than file price or customary market price, it is 
acknowledged that the efforts made by the prisons to abide by their vol- 
untary Compact diminished the dumping of prison goods on the market at 
lower than fair current prices. 

II. ENCOURAGE UIIPORI.; PHI SOU OPERATIONS III LAMIFAC TURING AND SELLING. 

Article II and Article III of the Compact did establish uniform 
prison operations with respect to the hours of labor inmates were per- 
mitted to work in industrial, production and the hours of operating pro- 
ductive machinery in the institutions. As a result of Article II, which 
limited the hours of labor in prison industries to hot more than those 
prescribed by the applicable code (meaning the corresponding code for 
free industry)* the prisons reduced their maximum hours per week per 
man from 40 hours to 36 hours in the manufacture of cotton garments upon 
notification of the approval of Executive Order No. 6828 affecting the 
hours in the Cotton Garment Industry. 

Uniform sales policies, agreements between free industry code au- 
thorities and the Prison Labor Authority with respect to quantity dis- 
counts and percentage of mark-up for sales to wholesalers, jobbers and 
retailers, worked out fairly successfully during the period industry was 

9742 



-IOC- 
operating under Codes of Pair Competition, 

III. DIVEHSIPI CATION SP3PADS W0EK A1.I0KG PHISONEBS AID EXPEDITES 
LATEP PEHABILITATION. 

One of the major problems confronting all prison officials today 
is that of providing sufficient work in the institutions to keep the in- 
mates employed .on projects which have rehabilitative features. Although 
Article VII, Section 2 (f~l) of the Compact provided that the Prison 
Labor Authority va.s to formulate such regulations as may be consistent 
with statutory provisions and as may be necessary to assure a diversifi- 
cation of the output of -orison industries in a fair proportion to the 
production of the industries affected, only a snail amount of diversifi- 
cation of prison industries Has accomplished while the Codes of Pair 
Competition and the Compact ^ere in effect. The diversification program 
as originally intended uhen the Compact '-as formulated, was never given 
a fair trial. The concentrated efforts of. such groups as the Cotton Gar- 
ment Code Authority and others which "ere continually objecting to the 
sale of prison made goods on the open market undoubtedly resulted in some 
decrease in the total dollar value of clothing producted in jorisons. 

Thus it is evident that unless there is an outlet for the products 
made in penal institutions the result is very detrimental to society in 
that it is compelled to pay a greater proportion for institutional main- 
tenance through taxation and the 2Ji"i> : '>oner is not provided rehabilitative 
work which trains him for useful employment r.hen he is discharged. It 
is agreed bj r all authorities that the diversification of industries in 
penal institutions apreads vrork among the inmates and "oy the spread of 
such -fork the inmates have the opportunity to receive training in the 
performance of varied tasks 'which is beneficial to them rhen'they again 
join the ranks of free society, 

IV. PUTUBE LEGISLATION. 

As the prison labor problem involves so many different elements, 
all of rrhich are a part of our penological system it is believed the 
time has arrived mien Federal Legislation should be enacted which will 
encourage the states to enter into a Prison Compact to which they may 
subscribe through approval by their respective legislatures. The objects 
and purposes of the Compact nould be to: 

(a) Maintain fair competition between products of private domestic 
industry and those of prison industry. 

(b) To assure a diversification of the output of prison industries 

in fair -proportion to the production of affected free industries, 

(c) To relieve unemployment within the respective penal institutions 
of the states by providing work for the inmates of a rehabili- 
tative and character building nature .and lessen the dangers 
inherent to idleness, 

V. STATE USE SYSTEM. 

i.kny prison officials contend that it is necessary for penal insti- 
tutions to sell their goods at prices lov^er than those charged in the 

9742 



-105- 

nublic market for free industry; goods of a similar nature in order to 
counteract the effects of free industry propaganda and the attempts to 
establish boycotts against prison made goods. Such methods nay - "b'~ re- 
garded 'as unfair" competition:: and should be eliminated. 

Because of the problems incident to the distribution of prison made 
goods, there has been advanced ~oi r some authorities a system of disposi- 
tion to the state and its political subdivisions. This is commonly known 
as the state-Use system. Under this system, when properly enforced, it 
becomes possible to remove all prison goods from the public market. In 
theory the plan sounds simple but in enforcement and practical applica- 
tion it has many defects, particularly -here it results in depriving free 
industry of its proportionate share of business from governmental insti- 
tutions, thereby offsetting benefits which might be gained from the 
standpoint of labor and industry. On the other hand the State-Use Sys- 
tem does eliminate prison made goods from the free industry market there- 
by doing away with the tendency to undermine the price structure. Fur- 
thermore it may be contended that the State-Use System, especially where 
it is tied in with a program of diversification of products, is more 
readily adaptable by the larger states. It seems to the writer that a 
partial state use system co-old be put into effect in every state in the 
Union and serve an economic benefit to each state however, an exclusive 
State-Use System as a means of solving the prison labor problem is re- 
garded by many authorities as impractical and contrary to the best in- 
terests of the public in general. After all, from 1T.R.A. experience, 
prison competition is not as vicious as some industrial groups would 
lead us to believe. If the prison goods are manufactured and placed on 
the onen market under fair competitive conditions, has not the public 
the right to be the judge as to whether or not it wants to buy such 
goods? Let us approach this life-long problem through the adoption of a 
Compact of Fair Competition for the Prison Industries and provide our in- 
mates with productive labor. If 'this is done the tax burden for insti- 
tutional maintainence can be lightened and prison production can be so 
diversified that no free industry will be compelled to carry a dispor- 
portionate share of prison competition. It is the -Titer's opinion 
that if an exclusive State-Use System is ever put into effect on a broad 
scale and proven successful the prisons must be guaranteed the exclu- 
sive market by the States and their political subdivisions for all 
prison products. 

The Federal Government can be of assistance to the various states 
in advising and aiding then in the establishment of a diversified prison 
program, but under no circumstances would it appear to be sound policy 
to attempt to dictate to the states or try to force any program into 
effect which the states do not wish to voluntarily accept. However, 
where the States are willing to adopt an adequate State- TT se System of 
marketing their prison products, it is believed such a system will 
generally leet with public approval. 

VI. LEGAL HEqjJIHEIiEHTS III DISPOSING OF P3IS01T LADE GOODS. 

As many of the states have enacted regulator;'- statutes for the pur- 
pose of identifying and controlling the shipment of prison made goods 
within their borders and the Congress of the United States has recently 



9742 



-105- 

enacted legislation with respect to prohibiting interstate transportation 
on -orison nade goods in certain cases, the latter commonly referred to 
as the Sumner-Ashurst Bill; (*) those dealing in prison made goods 
should constantly be informed with respect to the legal aspects thereof. 

In order that the States Signatory to the Compact might have up to 
date knowledge of the shipping and labeling requirements of legislation 
effective in the various states, the Prison Labor Authority classified 
and listed the states as to legal requirements late in the summer of 
1935, to the penal institutions under the jurisdiction of the Compact. 
A copy of the classifications is attached to this report as Appendix 
»L" .(**) The information contained in Appendix "17", along with the 
action taken by the states which have passed legislation enabling cer- 
tain provisions of the Hawes-Cooper Act, Appendix "C" , to become effec- 
tive is very useful to those dealing in prison goods, A list of states 
which have, up to December 4, 1935, accepted provisions of the Hawes- 
Cooper Act are listed in Appendix "M"« (***) While there are many 
other statutes both Federal and State which have an important effect 
upon the distribution of prison made goods, those referred to in this 
Section are of vital importance and should be analyzed carefully if 
any future legislation relative to a Hew Prison Compact is contemplated. 

The Federal Prisons operate exclusively under the state-use system, 
consequently none of the products made in these institutions enter the 
public market. However, the United States Bureau of Federal Prisons did 
become signatory to the Compact' through the signature of its Director, 
Mr. Sanford Bates, who signed the Compact as a matter of cooperative ef- 
fort, thereby lending the support of that Bureau to the Prison Labor 
Program under the National Hecovery Administration. 

(*) Bill, Public No. 215, 74th Congress. 
(**) Appendix No. »L». 
(***) Appendix No. "Li". 



9742 



-107- 
APPENDIX A 

.. iV;sTrucTio:'s to comHaina^ts 

AGAINST 

UNFAIR PHI SOI' COMPETITION 

The quotations "below, unless otherwise indicated, are taken from 
the letter of the Administrator to the President, of April 18, 1934, 
transmitting for approval the Compact of Fair Competition for the 
Prison Industries of the United States -of America.. 'This agreement 
will he referred to as the "Prison Labor Compact" .or simply as the 
"Compact". 

"A Compact of Fair Competition for the Prison industries of the 
United States of America has "been signed "by the governors or 
prison executives of the following twenty-eight States of the 
United States of America: 

Alabama Maryland Pennsylvania 

Connecticut Massachusetts Hhode Island 

Delaware Michigan South Carolina, 

Georgia Minnesota South Dakota 

Illinois Missouri Tennessee 

Indiana Nebraska • ' Vermont 

Kentucky New Hampshire West Virginia 

Louisiana ■ New York Wisconsin 

Maine North Dakota Wyoming 

Oklahoma 

It is expected that the Compact will be signed by other states 
in the future. This has been the result of a long and continous 
effort by this Administration to establish and maintain fair 
competition between products of private domestic industry and 
those of prison industry." 
The state cf Iowa has also subscribed to the Compact. 

Some of the general provisions of the Compact are mentioned in 
the next -paragraph of the Administrator's letter which follows: 

"The Compact covers products mined, manufactured, produced or 
distributed by prison labor in the state signatory to the 
Compact. It limits the hours jf labor in prison industries to 
not more than those prescribed in the applicable code, adopted 
under the laws of the United States governing each particular 
industry, and provides further that in no case shall any inmate 
be required or permitted to work more than forty hours in any 
one week. The hours of operation of productive machinery are 
limited to not more than is prescribed in the Code of the 
competing private domestic industry. It prohibits the employment 
of persons under sixteen years of age in any prison industry and 
of persons under eighteen years of age at operations or 



974-2 



-108- 

occupations which are hazardous in nature or dangerous to health," 

Host of the complaints against prison competition allege that the 
prison is selling in the open market at a price which is "below fair 
current prices prevailing in the market in which the oroduct is 
customarily sold. Under the Compact it has been agreed by the States 
that 

"prison products, when sola by the prison or through a contractor, 
whether sold direct or through any agency, shall be sold not 
lower than the fair current ririce prevailing in the market in 
which the product is customarily sold - to wholesalers, retailers, 
or consumers as the case may be." Article V, Section A. 

Under Article Vii, Section (1), of the Compact, there is created a 
Prison Labor Authority which has the power and duty to enforce compliance 
by subscribing states. The Compact also provides the procedure to be 
followed by an individual complaining that the Compact is not being 
observed. The Prison Labor Authority has the power and duty, : 

"To hear and adjust complaints arising under this compact made 
by affected parties: Provided, however, that at the time any 
such complaint is made the complainant must agree to submit 
such facts and figures as may be necessary to the determination 
of the issues involved," Article Vii, Section 2 (g). 

Any complainant who is covered by a Code should forward to his 
Code Authority his complaint. Accompanying his complaint he should 
forward the facts and figures which sustain his complaint and which 
are necessary to the determination of the issues, or in the alter- 
native he should indicate his willingness to appear before the Prison 
Labor Authority and present such facts and figures. The Code Author- 
ity should forward this complaint, together with any other complaints 
of the same nature, to the Prison Labor Authority, c/o J. V. Bennett, 
Tower Building, Washington, E.C. The Code Authority should then request 
that the complainant be granted a hearing before the Prison Labor 
Authority. The Code Authority may send such representative or 
representatives as it wishes to this hearing, (One copy of each 
complaint and of the supporting papers should be enclosed.) 

It is also provided in the Compact that it shall be a power and 
duty of the Prison Labor Authority 

"To determine, after conferring with the Code Authority of the 
industry affected and upon request of any person or firm 
affected, the prices, charges and amounts provided for in 
Article V, Sections A and B hereof; such determination to be 
subject to appeal to the president of the United States." 
Article VII, part of Section 2 (d). 

The representative or representatives sent by the Code Authority 
to the hearing should be authorized by the Code Authority to express 
its view of the matter at the hearing. 



9742 



■10 f J- 



In the Compact it is made the duty of the Frison Labor Authoritjr 
to determine the fair current price which is to prevail in a given 
market when complaint is made. 

The subscribing States have also agreed that ;rison labor will 
not be contracted to provide manufecturers for small return which 
would affect the competing outside labor. This part of the agreement 
is contained in Article V, Section (b). If there is any complaint 
alleging the non-observance of this latter provision, the complainant 
should follow the same procedure in submitting his complaint. 

The various Code Authorities have been informed of their rights 
to co~o "erate in this matter. They also have a copy of these instruc- 
tions and we feel sure that any well-founded complaint will receive 
careful consideration from the appropriate Code Authority. 



971-2 



-110- 

APPEMDIX B 

SIXTY IIIDUSTRIES 

which have "been successfully established in prisons in the U.S.A., and 
the Code Authority addresses.. 

*1. Abattoir. Beef and pork products, , lard, sausage, smoked meats, etc. 

2. Agricultural Implements. (Farm Equipment Manufacturing Industry) 

3. Automobile Tags, Hunters' Licenses, etc. (Marking Devices Industry) 

4. Bags, bagging, burlap, and jute products, spinning and weaving 

(Textile Bag Industry, Hair & Jute. Felt Industry) 

5. Baskets, split wood (Lumber & Timber products Industry) 

6. Binder twine, rope cordage, etc. (Cordage & Twine Industry) 

7. Book Bindery, including the re-binding of school end library books, 

(Book Publishing s Book Sellers Trade Industry) 

8. Brooms, corn and fiber, and brushes, paint, scrub, staple set 
and rubber set, etc. (Broom Manufacturing, Brush Manufacturing) 

9. Canning, including fruits, vegetables, pulping, butters, vinegar, etc. 
(Canning Industry) 

10, Cement Manufacturing mill. Element Products ; Blocks & posts, culvert 

pipe, garden furniture 
(Concrete Masonry, Concrete Pipe Mfg.) and ornaments. 

11. Cotton Garments: Children's play suits, dresses, hoover aprons, 
smocks, pajamas, night gowns, etc. 

Coats, pants, breeches, and knickers for men and boys of cotton and 
duck. 

Overalls and coveralls. 

Shirts, dross, work, blouses, flannel, etc. 

Underwear, men's shirts, shorts, and women's undergarments 

Cotton yardage, including duck, sheeting, shirting, ginghams, 
percales, broadcloth, denim, toweling, ticking, knitting yarns, 
and mop yarns. 

(Underwear & Allied Products Industry, Undergarment & Negligee Industry, 
Cotton Garment Industry) . 



(*) Ho code approved 



9742 



-Ill- 



12. Spinning, Weaving, Finishing (Hair and Jute felt Industry) 

13. Dehydration, fruits, vegetables, etc. 
(Pacific Coast Dried Fruit Industry) 

14. Foundry products, including hollow ware manhole frames and 
covers, alley grates, lamp posts, valves fittings, spigets, 
hydrants furnace parts, etc. 

(Fabricated Metal Products Manufacturing & J^etal Finishing and 
Metal Coating Industry) 

15. Grey iron. (Grey Iron Foundry) 

16. Brass, bronze, and aluminum (Copper & Brass. Mill Products Industry 
Copper, Brass, Bronze & Related Alloys Trade, Aluminum Industry) 

17. Furniture, (wood) office, household, and institution. Beds, 
"bureaus, desks and tables, chairs, benches and settees. 
(Furniture Manufacturing) 

18. Files, cabinets. (Office Equipment Mfg. Industry) 

19. Caskets. (Funeral Supply Industry) 

20. Galvanizing, hot and electric-galvanizing and nickel plating. 
(Galvanized Ware Manufacturing) 

21. Handles, ax, pick, broom and brush. (Lumber & Timber Products 
Industry, Broom Mfg. and Brush Mfg. ) 

22. Highway Markers, street, and road signs, etc. (Marking Devices * 
Industry) 

23. Harnesses, whips and leather goods. (Saddlery Manufacturing) ' 

24. Hats, caps, and gloves, (Hat Manufacturing industry,' 
Cap & Cloth Hat Industry) 

25. Hosiery, men's, women's, children's, work and dress 

(Hosiery Industry) . 

?■ :. [ ' . »'. ■ 

26. Ice. (ice Industry) 

27. Knit goods, including underwear and sweaters' 

(Knitted Outerwear Industry, Underwear & Allied Products Industry) 

28. Laundry and dry cleaning (Laundry Trade) 

29. Mattresses and pillows (Bedding Manufacturing Industry) 



9742 



-112- 

30, Mill work and pattern work, (Lumber & Timber Products Industry) 

31, Metal workin g; Aluminum ware, stamped and spun (Aluminum Industry) 

32, Galvanized and tin ware, tin cans, (Galvanized Ware Mfg.) 

33, Badges and Seals, (Marking Devices Industry) 

34, Piles, lockers, shelving, metal furniture, vzire products, baskets, 
trays, fly swatters, etc. (Fabricated Metal products Mfg.) 

*35. Nursery, reforestation, and shrubbery 

37. Paint, including traffic paint, house paint, varnish, etc. 
• (Paint, Varnish & Lacquer Mfg.) 

38. Printing and ruling, including job, reports, forms, school books.. 
(Printing Eouipment Industry & Trade^ Book Manufacturing Industry, 
Book Publishing Industry) 

■ « 

39. Bugs, carpets, runners, etc. (Carpet & Rug Mfg. Industry) 

•i * 

40. Rubber products, including mats, and tire retreading 
(Rubber Mfg. Industry) 

41. School Furniture (Furniture Mfg. Industry) 

42. Shoes and Shoe Repairing (Boot & Shoe Mfg. ( Industry) 

43. Soap, including chip, toilet, powders, insecticides, and 
disinfectants. (Soap & 'Glycerine Mfg. Industry) 

*44. Snow fencing 

45. Quarrying, crushed rock, building stone and cast stone. 

(Marble Quarrying & Finishing Industry, Building Granite Industry) 

46. Brick, tile, and clay products (Structural Clay Products Industry) 

47. Sugar, cane or beet, including molasses, syrups, etc. 
(Beet Sugar Industry) 

48. Suits, uniforms, and overcoats (Cotton Garment Industry) 

49. Tanning Industry (Leather Industry) 

50. Toys, wooden and Metal (Toys & Playthings) 



(**) No code auoroved 



<:■/■■• 



-11b- 



51. Wicker, willow, and rattan ware (Lumber & Timber Products Industry) 

52. Woolen Yardage, including blankets, suiting. 
(Woolen Textile Industry) 

53. Scouring ( Steel Wool Industry) 

54. Woolen Yardage, Spinning, Weaving, Finishing 
(Woolen Textile Industry) 



9742 



-114- 

APPENDIX C 

NATIONAL RECOVERY ADMINISTRATION 

IMMEDIATE RELEASE 

OCTOBER 16, 1934 RELEASE NO. 8314 

TEXT OF CCTTOII GARMENT COMMITTEE REPORT 

The tent of the report submitted to the national Industrial He c every 
Board October 10, by the Cotton Garment Committee is given below. 

The appointment of this committee was directed in the Executive Or- 
der which stayed until October 15 an amendment to the code to reduce the 
maximum work-week to 36 hours and increase the schedule of minimum wages. 
The committee was empowered to "hear protests, investigate the facts and 
report its recommendations on or before October 10." It is composed of 
D. Li-. Kelson, member of the Industrial Advisory Board, Milliard Hotchkiss, 
Chairman of the IIRA General Code Authority; and W. Jett Lauck, economist. 

The text of the report follows: 

"The Cotton Garment Industry has requested reconsideration of amend- 
ments to Articles III and IV of the Code of Fair Competition for the Cot- 
ton Garment Industry which amendments were approved by Executive Order Ho. 
6828 of August 21, 1934. 

"This Committee has been constituted a Board of Review to consider 
this request. 

"The Code of Fair Competition for the Cotton Garment Industry as ap- 
proved on November 17, 1933, contains in Article III on the subject of 
hours, the following language: 

'A. No manufacturing employee shall be permitted to work in 
excess of 40 hours in any one week, or more than 8 hours in 
any one day, provided, however, that the Cotton Garment Code 
Authority shall, immediately after the effective date begin 
an investigation tinder such rules and regulations as to reports 
as the Code Authority may require and the Administrator approve, 
to determine whether or not the 40-hour week provision of this 
section is resulting in increased employment, and the said Code 
Authority shall report its findings on this question to the Ad- 
ministrator not later than 60 days after effective date, so that 
the Administrator may determine whether or not the provisions of 
this Article shall be changed.' 

"Article IV on wages is also effected by the Order. 

"At the instance of the Code Authority for the Dress Manufacturing 
Industry and the Code Authority for the lien's Clothing Industry, hearings 
were held in Washington on June 18, 19, 20, and 22, to determine among 
other things whether or not the 40-hour provision of the Code should be 
modified. 



9742 



-115- 

"These hearings were participated in by a large number of the 
members of the Cotton Garment Industry representing every branch 
of the Industry and every section of the country. The widest oppor- 
tunity was also given for other interested parties, including 
numerous members of Congress, to present views and submit facts in 
respect to this issue. 

"At these hearings the Code Authority was represented by the 
Chairman, the Director, the Counsel, and the statistical staff. 

"In addition to the representatives of the above mentioned Code 
Authorities for the Dress Hanufacturing Industry and the Hen's 
Clothing Industry, representatives of Labor presented arguments for 
the shortening of hours below the 40-hour limit originally provided 
in the Code and the adjustment of piece rates. 

After the hearings, the Division of Research and Planning of 
the National Recovery Administration caused a study to be made as 
to the operation of the 40-hour provision expecially in respect to 
employment as revealed by the statistical data prepared and present- 
ed by the Code Authority and many conferences were held in which 
members of the Industrial Advisory Board, the Consumers Advisory 
Board, and the Legal, Economic, and Administrative staffs of the 
National Recovery Administration participated, and all of them at 
one time or another gave full expression to their respective views. 

"The Committee has reviewed carefully the complete records of this 
case to date. 

"Neither the state of facts uoon which the case came before us nor 
the time available indicated an occasion, on our part, for the assembling 
of original new data. Nevertheless, we have interpreted our status as 
a review board broadly and have excluded no new facts or viewpoints 
vhich might have a bearing on the issues. 

"Immediately upon our appointment we conferred with the attorney 
of the Code Authority and arranged to visit its offices in order to 
have direct access to the data which it has assembled. In connection 
with this visit the attorney, the chairman, representatives of the 
statistical and compliance staffs of the Code Authority and members of 
the industry designated by the Code Authority ioresented the case of the 
industry. By mutual assent, proceedings were informal and largely in 
the nature of conference, but a transcript was kept and has been care- 
fully reviewed along with numerous exhibits which '-'ere placed in the 
record. 

"17 e requested the Labor Advisor;' - Committee to arrange for similar 
conferences with such representatives of Labor as were known to have an 
interest in the questions at issue. A transcript of these -oroceedings 
was also made and carefully studied, 

"Representatives of those Codes which We're known to have overlapping 
interests with the Cotton Garment Code were also asked to oresent any 



9742 



-116- 

pertinent material. In this group there was representation of manufac- 
tures who operate both under the Cotton Garment and other Codes. A 
transcript of these proceedings was made and studied. 

"In addition to securing facts and views from the above groups, we 
have received and considered all volunteer contibutions, oral or written, 
including an oral presentation by former Senator James A. Reed and 
Mrs. Reed, speaking particularly from the standpoint of the Donnelly 
Garment Companjr of Kansas City. 

"Finally, we have cles.red with the appropriate divisions of the 
National Recovery Administration as to the history and status of the 
case from a legal and factual point of view. 

"The record of the case indicates that decisions hitherto have rested 
for the most part on statistics prepared in the offices of the Code 
Authority by its agents. Exhibits containing new data and new interpre- 
tations have now been presented which do not entirely harmonize with 
earlier reports, especially in respect to pre-code and post-code employ- 
ment. The present director of statistics of the Code Authority was associated 
with the previous director, who was in charge of the earlier studies, and 
has testified that there were no changes in the schedules used in securing 
information for. the earlier and the later reports and that instructions 
accompanying the schedules as well as the handling of the data were the same 
in respect to each of the reports. 

"Upon these representations the committee at once decided to give 
consideration to the contention of the Code Authority that new facts 
meriting serious consideration by a review board are now available and to 
weigh the information now presented as it stands before undertaking any 
detailed checking on our own account of earlier and later reports as to 
either their conclusiveness or their statistical comparability. 

"In the judgment of the committee there is no zone of factual, con- 
troversy wide enough to have a crucial bearing on our decision. 

"The Code Authority, as we have understood the testimony and accompany- 
ing exhibits, is convinced that there was relatively heavy employment in 
the industry during the later phases of the depression preceding the code» 
This they attribute to the fact that the consumer's depleted purchasing 
power permitted him to buy onljr low-priced merchandise. Unrestricted com- 
petition in the Cotton Garment Industry at that time, as the Code Authority 
interprets the situation, led to exceedingly low wages, lengthening of hours 
and extremely low prices for merchandise. 

"When the code came along and established the 40-hour week with a 
$13.00 minimum wage in the north and $12.00 in the south, it increased 
costs and narrowed the differential in price between the nroducts of the 
Cotton Garment industry and competing goods of other industries, at 
a time when reemployment in other industries was enabling more -oeople 
to purchase goods in the higher price brackets. The effect of all 
this, they say, was materially to reduce volume of business and hence 



9742 






-117- 
enroloyment in the Cotton Garment Industry. 

"Beneficent and desirable as all the official representatives of 
the industry who appeared before us believe the standards originally 
set up in the Code to have been, its immediate effects, they say, were 
extremely burdensome. For this reason, and because they contend that 
enforcing the provisions of the amendment will further increase cost 
and preclude any early possibility of increasing employment, they 
urge the necessity of a breathing spell in which the industry may 
adjust itself to burdens already assumed. 

"The end costs of goods manufactured under the Cotton Garment 
Code today result in part from burdens already assumed under this 
code which the industry freely accepts. In part, they represent in- 
creased costs of material's which reflect the cotton processing tax and 
costs which embody net/ labor standards in other codes. Concerning all 
these elements of cost there is no controversy. 

"In these circumstances the Committee has sought the conroetent 
testimony of the members of the industry who appeared before us as to 
the amount by which enforcement of the provisions of the amendment 
would presumably raise prices the consumer would have to pay for arti- 
cles manufactured under the Cotton Garment Code. The testimony on 
this point is not unanimous but there appears to be substantial agree-' 
ment that the cost of a f orty-nine-cent work-diirt would not be in- 
creased more than five cents, and otner cotton garments in a sub- 
stantially similar ratio to retail price. 

"While reemployment is an outstanding objective of the 1JIHA, 
bringing sub-standard industries measurably up to competing standards 
is, we believe, also an important objective. The industry, as repre- 
sented by the Code Authoritjr and its staff has wisely faced the fact 
of the previous low standards and it expresses gratification that 
standards have been raised. To all appearances, the Code Authority 
is making an earnest and well directed effort to make the standards 
now officially in force effective throughout the industry. We are con- 
vinced, however, that in its anxiety rbout being able to hold its lines, 
the Code Authority greatly over-emphasizos the possible adverse effects 
upon enforcement and upon the welfare of the industry that any increases 
in cost that can possibly flow from carrying out the terms of the amend- 
ment may have. 

"Moreover, we believe they have not given sufficient recognition to 
the prejudice to the public interest and to industrial stability that 
must result from maintaining through official approval pockets of pro- 
duction under lower labor standards along the competitive border line 
of industries whose' codes enforce higher labor standards. The tendency 
of production to seek these low standard pockets is inevitable and in 
the long run, is bound to complicate the problem of enforcement not 
only for the Codes with the higher standards but for all Codes that 
operate within a given competitive field. 



9742 



-118- 

"From our discussions with the director of compliance of the Cotton 
Garment Code Authority, we believe his excellent organization has now 
reached a point at which, irrespective of the amendment, it will need 
to require a filing of all piece rates with the Code Authority and pro- 
ceed as rapidly as possible with such a degree of standardization as will 
enable the Code Authority to assure itself of the integrity of all piece- 
rate structures under the Code. As we see the situation, this is the only 
material departure from existing practice under the Code which. the. change 
to a 36-hour week with the maintenance of present wages for week workers 
and a 10 per cent addition to piece rates existing on May 1, 1934, will 
require. • ■ -. ■ 

"Tie admit freely that the terms of the amendment may result in some 
inequity as between relatively high-standard and low^-standard producers, 
but v/e cannot see that these are any greater than is likely to accompany 
any over-all ruling. 

"For all these rea.sons v/e recommend that Executive Order No. 6828 of 
August 21, 1934 be sustained. 

"T7e recommend further, however, that effective date of the Order be 
made December 1, 1934. Our reason for this second recommendation is that 
the Pall Season in the industry will then be over, and time will thus be 
given to the industry to make necessary adjustments or changes in its 
working plans and procedure. 

"In respect of the sheep lined and leather garment subdivision of 
the Cotton Garment Industry the time limit for our decision precluded 
consideration of proposals made "by representatives of the industry. These 
proposals appeared to merit further consideration and we therefore reouest 
an extension of time as to this item. 

"In arriving at this decision we cannot fail to recognize the com- 
petition of products of prison Ubor and of sheltered workshops on certain 
subdivisions of the Cotton Garment Industry. Tie therefore recommend that 
the National Industrial Recover" - Board designate a commission to investi- 
gate the effect of this competition, to study the operation of the prison 
labor compact, especially as to the enforcement of the standards of compe- 
tition with private industry there set up, and report not later than 
December 1, 1934 upon ways and means of effectively meeting this issue. 

"while the committee recognizes that there will be occasion in some 
instances for indulgence to particular producers for cause duly shown 
and authenticated, we believe that anything resembling wholesale ex- 
emptions would undermine the code and the splendid enforcement results 
vhich the Code Authority, as now set up, is accomplishing. Tie recommend, 
therefore, that the scope of an?/ machinery provided under, the amendment 
for hearing pleas for indulgence be scrutinized with great care so that 
its decisions ma" improve and not impair compliance. 

"77 e wish to commend the organization and the personnel which the 
Code Authority has set uo to enforce compliance with all of the provi- 
sions of the Code. Under pecv-liarl;;- difficult conditions, they have 
achieved most gratifying results. It is highly essential that in apply- 
ing 'the orovisionsof the amendment no action be taken which would under- 
mine or discourage progress in this important field of activit-*." 



f->rr a t-\ 



-119- 



APPENDIX D 



For Release Release No. 9029-A 

November 28, 1934 

NATIONAL RECOVERY ADMINISTRATION 



REPORT OP COMMITTEE ON 
COMPETITION OP PRODUCTS OF COTTON GARMENT INDUSTRY 
WITH PRODUCTS OF PRISON LABOR AS DIRECTED BY 
EXECUTIVE ORDER NO. 118-135 
of October 12, 1934. 



Committee 
Washington, D. C. Joseph N. Ulman, Chairman 

November 26, 1934 Frank Tan .en"ba.um 

W. Jett LauD 



9742 



-120- Washington, D. C. 

November 26, 1934. 
To the 
National Industrial Recovery Board 

Gentlemen: 

This letter of transmittal is to "be regarded as an integral part of the 
report of the undersigned committee, submitted in accordance with the order of 
the President dated October 12, 1934. That order directed us to "investigate 
the effects of competition between the products of prison labor and sheltered 
workshops on the one hand and of the cotton garment industry on the other, 
study the operation of the Prison Labor Compact especially as to the enforce- 
ment of the standards of competition with private industry established therein, 
and report to the National Industrial Recovery Board, concerning said matters 
not later than December 1, 1934." 

In order to consider adequately, the relatively narrow questions that have 
arisen and will arise between the Prison Labor Authority and the several Code 
Authorities administering industries subject to prison labor competition, we 
have taken into account the whole question of prison labor as it is related 
to 

(a) the underlying purposes of imprisonment for crime; 

(b) the economical and effective administration of prisons; 

(c) the extent and effects of competition between prison labor and 

free labor in specific industries; 

(d) the developed policies of State and National governments in rela- 

tion to the whole subject; 

(e) attitudes of industry; 

(f) attitudes of labor; 

(g) the relationship of a proper regulation of prison labor to a 

rational attack upon the problem of crime. 

At the outset we realized that we were dealing with a complex problem, 
about which it would not do to make a report based upon our general knowledge 
of the subject as obtained from the pre-existing literature. Particularly 
with respect to the narrower question before us, everything in the literature 
is outmoded by reason of the operation of the Prison Labor Compact and the 
changes it has made or attempted to make in the competitive relationships 
between prison industry and free labor industry. Therefore, we devoted the 
first part of the month to extended hearings at which there testified represen- 
tatives of industry; of labor; of prison administration; of the legal and 
other divisions of NRA; and. one witness who spoke not for any party to the 
manifold controversy but from the viewpoint of scientific criminology. 

The case of industry was presented by the following witnesses: 

Raymond A. Walsh, General Counsel, Cotton Garment Code Authority. 
Col, R, B. Paddock, Executive Director, Cotton Garment Code 

Authority. 
Ben Geaslin, Assistant Counsel, Cotton Garment Code Authority 
A. B. Dickinson, Washington Representative, Cotton Garment 

Code Authority. 
Herbert Mayer, Chairman, Prison Committee, Cotton Garment 

Code Authority. 



9742 



-121- 



A. B. Salent of Salent and Salent, Incorporated. 

Isadore Fine, President, national Workshirt Manuf acturers 

Association. 
Harry Johnson, Oberman and Company, 
W. W. Harlin, Prison Committee, Cotton Garment Code. 

C. F. Habegger, Prison Committee, Cotton Garment Code. 
L. M. Jones, Prison Committee, Cotton Garment Code. 

Walter Mitchell, Jr., Executive Secretary, Furniture Manufacturers 
Code Authority. 

D. P. Porterfield, Director, Department of Marketing, United 
Typo the tae. 

J. H. Ilelson, Secretary, Trade Practice Committee, Public 

Seating Industry. 
W. C. Craig, Chairman, Binder Twine Agency of Code Authority. 
J. S. McDaniel, Executive Secretary, Cordage and Twine Code 

Authority. 

Organized Labor expressed its view through - 

Thomas Rickert, President, United Garment Workers. 

Charles N. Green, Int.rnational Ladies Garment Association. 

William C. Rushing, American Federation of Labor. 

G. E. Meadows, American Federation of Labor. 

Miss Rose Schneiderman, Labor Advisory Board, National Recovery 

Administration. 
Jacob Petofsky, Assistant President, American Clothing Workers. 

Sidney Hillman, in his dual capacity of President of the Amalgamated 
Clothing Workers and Member of the Labor Advisory Board, also conferred 
with us, although his statement is not included in the stenographic tran- 
script. However, Mr. Hillman iterated to us the views expressed by him at 
the hearing before Acting Division Administrator Collins on May 26, 1934, 
which we have read and considered. 

Prison Administration presented its case through - 

Hon. Sanford Bates, Director, Federal Bureau of Prisons. 
Mr. James V. Bennett, Secretary, Prison Labor Authority. 
Mr. Howard S. Gill, Economic Adviser, Prison Labor Authority. 
Mr. Walter N. Thayer, Commissioner, Department of Correction, 

New York State. 
Mr. H. H. Stewart, Superintendent, Prison Industries, State 

of Alabama. 
Mr. Robert Chapman, Superintendent, Prison Industries, Missouri 

State Prison. 
Mr. L. E. Kunkle, Warden, Indiana Penitentiary. 

Mr. E. L. Pardue, Superintendent, Industries State of Tennessee. 
Mr. C. L. Stebbins, Superintendent, Michigan State Industries. 
Mr. Samuel E. Brown, Warden, Oklahoma Penitentiary. 
H. E. Donnell, Superintendent, Prisons of State of Maryland. 

We obtained important information regarding HRA policies and especially 
9742 



-122- 



the steps, leading to the formation of the Prison Lafror Compact and its 
administration from-* 

Mr. Linton M. Collins, Acting Division Administrator, National 

Recovery Administration. 
Mr. J. M. Keating, Legal Adviser, Dress Manufacturers' Code 

Authority. Formerly Legal Adviser to National Recovery 

Administration on the prison labor problem. 
Major B. H. Gitchell, Special Adviser, National Industrial 

Recovery Board. 
Mr. H. E. V/ahrenbrock, Legal Adviser, National Recovery 

Administration. 
Mr. Peter Seitz, Legal Adviser, National Recovery Administration. 
Mr. Lester Kintzing, Industrial Advisory Board, National 

Recovery Administration. 
Mr. Mercer G. Jchnston, Consumers Advisory Board, National 

Recovery Administration. 
Mr. Sol A. Rosenblatt, Division Administrator, National 

Recovery /Administration. 
Mr. David 'Ziskind, Labor Advisory Board, National Recovery 

Administration. 

A detached view on many of the most vexed questions before us was 
presented fry Professor Louis N. Robinson, of Swarthmore College, Professor 
Robinson is author of a standard book on prison labor - "Should Prisoners 
Work?" He came at our express invitation to answer questions that had 
arisen out of the other testimony. 

It thus appears that in spite of the short time at our disposal we 
have tried to assemble the pertinent facts and that our conclusions and 
recommendations are based mainly upon data taken from life rather than 
from books. For statistics prior to 1932 we have relied upon Bulletin No. 
595 of the Bureau of Labor Statistics, f olume ' 9' of the Report of, the 
National Commission on Law Observance and Enforcement' (The Wickersham 
Commission) has been helpful to us. This deals with the whole subject of 
Penal Institutions and contains a valuable chapter on Frison Labor. 

The testimony taken and exhibits filed with us comprise a steno- 
graphic record, of over 1200 pages. It would not be practible to summarize 
the statements of the several witnesses but is important to state that we 
have afforded all interested parties full opportunity to be heard. Through 
their several spokesmen they have stated their respective positions clearly 
and vigorously. These must be set out briefly and objectively because our 
conclusions flow directly from them. 

The Argument For Industry 

This part of the testimony falls into three sections. 

First - The Cotton Garment Industry. 

From this source and form Organized Labor arises the most vigorous and 
determined opposition to the present status. Essentially, this industrial 
group demands the absolute and immediate removal of prison-made goods from 

9742 



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the open market. It repudiates the workability of the Prison Labor 
Compact as a means to insure fair competition. It claims that a contin- 
uance of prison-made goods upon the open market will destroy the Cotton 
Garment Code and push the industry back into the miserable sweat-shop 
conditions from which it is emerging. It has a special grievance growing 
out of the grant to prisons, members of t he Compact, of the National Recov- 
ery Administration Blue Eagle label which the industry declares is a fraud 
upon the consuming public. It claims that the action of Congress in adopt- 
ing the Hawes-Cooper Act in 1929 led the industry to expect the virtual 
elimination of prison labor competition bv 1934 and that relying upon that 
expectation its larger units have withdrawn from prison manufacture and 
made large new plant investments outside of prisons. It claims that it 
was misled further "by early action on the part of the National Recovery 
Administration apparently looking to the immediate abolition of prison 
competition: e.g., the flat prohibition in the original drafts of the 
Retail Code, and special exemptions granted ley the Labor Advisory Board 
regarding wages to apprentices in the industry. This industry also charges 
that the Prison Labor Authority in administering the Compact has failed en- 
tirely to cooperate with the Cotton Garment Code Authoritv and the Adminis- 
trator in charge of that Code, has r lied upon misleading data regarding 
current prices of merchandise, and has insisted improperly upon an ex- 
cessive labor cost differential favorable to prison labor as against free 
labor. 

Asked whether they would prefer the untrammelled competition of 
unregulated prison industry to further efforts to coordinate the industry 
with free-Labor industry under the Compact, the representatives of the " 
garment trade answered emphatically "Yes". They profess absolute disdain 
of the possibility of effective control of prison manufacture; some of 
their spokesmen charge every agency of prison management with direct bad 
faith. They claim that unless the competition of prison labor is absolute- 
ly eliminated, the entire industry will be ruined and its 165,000 em- 
ployees will be thrown out of employment. 

The testimony given by this group is important out of all proportion 
to its accuracy in detail. A state of mind, whether based on fact, fear, 
or fancy, is something that must be reckoned with. These manufacturers 
are determined that competing prison labor must go. They regard the Prison 
Labor Compact as a means of perpetuating it, of increasing rather than de- 
creasing the competition or prison made goods with those of their own manu- 
facture. Right or wrong, they are prepared to fight on this issue to the 
bitter end. In this fight they are working hand in hand with labor, and 
they have the support of large sections of the distributing trade and the 
consuming public. Such women's organizations as the Federation of Women's 
Clubs, the Consumer's League and others have joined the manufacturers and 
labor in the dissimination of the thought that goods made in a prison are 
essentially wicked goods that must not enter into commerce. 

This group favors the State Use System of prison production. 

Second - The Twine and Cordage Industry. 

Although the prisonsiproduce one-third of the binder- twine made in this 
country, this industry seems willing that prison industry in this line shall 
continue, provided that under the Prison Labor Compact there can be secured 

9742 



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eauality of competitive prices, and provided that each State shall confine 
its sales within its own borders. It relies traon the v awes- Cooler Act 
and the Prison Labor Compact as means toward these ends, although it 
complains that a differential in favor of prison labor costs has been set 
up and that there has been a lack of cooperation with the industry in the 
fixing of prices of prison-made goods. It makes no charge of bad faith, 
but asserts vigorously that administration of the compact has been ineffi- 
cient. 

Third - Other Industries, particularly Furniture, School Desks, etc. 

Witnesses appearing before us indicate no immediately pressing Ques- 
tions in these lines. 'Generally, they object to a. labor cost differential 
favoring prisons and urge closer cooperation between Prison Labor Auth- 
ority and the several trade Code Authorities. They favor the State Use 
System but admit that in some States where that system r>revails certa.in 
industries have succeeded in curtailing the distribution of prison-made 
products to state, county, and municipal agencies of government. 

The Arguments of Prison Management. 

The case for Prison Management was presented in part by persons like 
the Hon. Sanford Bates and Dr. Walter 5F. Thayer, who have no personal 
or official connection with the controversial auestions before us, and 
in part by various wardens, managers of prison industry, State Superin- 
tendents of Prisons and others who are concerned directly with the con- 
flict. Upon certain points they all agree and it is not possible in a 
brief abstract to emphasize these points adequately. 

1. Prisoners Must Work. 

2. If imprisonment is to have any value as an agency for re- 
habilitation, prisoners must work in productive enterprises, on a full 
time basis and under conditions -approximately the same «s those prevail- 
ing in free society. 

3. There is now and for years there has been an appalling 
amount of idleness in most orisons; idleness in prison has increa.sed 
greatly during recent years and will increase beyond the safety-point 
unless a remedy is found at once. 

The evidence we have heard from this source has confirmed and in- 
tensified our conviction that Prison management faces a grave crisis. A 
prison filled with idle men is a prison ready for riot and bloodshed. 
But even worse than that, the whole scheme of criminal justice and im- 
prisonment for crime becomes nugatory, socially wasteful, and a mockery 
unless prison life can be made a constructive experience for the indivi- 
dual sent to prison. 

These witnesses concede that prison labor ought not to compete with 
free labor to the injury of the latter, and that products made in prison 
ought not oe sold in the open market at prices that will depress the market 
price of like products. They assert that the Prison Labor Compact assures 
these conditions of fair competition. Under the Compact, contractors hir- 
ing prison labor are reouired to pa.y the prisons at rates based on the 
rates of pay for free labor, and States manuf acturing and selling under the 
States Account System are reouired to sell at prices determined upon the 
basis of current prices of like products in the place where such sales are 
made. 



-In- 
compliance with these provisions of the Compact is sought to "be 
assured "by a Prison Labor Authority, with powers and duties similar to 
those of the various Code Authorities under National Recovery Adminis^- - ... j. 
tration. Similarly, the Prison Labor Authority has obtained the right 
to issue to States and contractors operating under the Compact, a Blue 
Eagle label for use on garments manufactured in prison and is planning 
to issue similar labels to other prison industries when labels are re- 
quired under the respective codes affected. 

The labels now in use differ from ordinary NRA labels only in bearing 
the word "Compact" instead of a Code number. No ordinary purchaser of goods 
would be likely to observe the difference! This similarly (denounced as a 
fraud by the spokesman for industry and labor, see infra ) is defended by 
prison management, however, upon the grounds that the operation of the 
Compact has made prison labor competition fair competition, for the reasons 
stated above, and that without the label goods made in prison will be barred 
from the channels of retail trade by the terms of the Retail Code. 

When their attention was called to the arguments of Industry and of 
Organized Labor against the label (see infra) these witnesses insisted 
that the prisons ought, as a matter of right and justice, to enjoy the 
benefits of the label, as compensation for the freedom of action they have 
given up by entering into the prison Compact. ViTe then directed their at- 
tention to the fact that the Prison Labor Authority has granted prison- 
made goods a differential in labor cost amounting to approximately 2 per 
cent to 3 per cent of their selling price as- compared with goods made by 
free labor. Wh<§n pressed, a number of these witnesses' admitted that it 
was hard to justify both the label and the differential, although others 
insisted that without the differential they could not continue to manu- 
facture and sell. All asserted that the label is absolutely essential and 
that if it is withdrawn the Prison Compact will be dissolved at once. This 
result they viewed with grave concern as they felt that the Compact is the 
first constructive step toward a real solution of the prison labor problem. 

They testified that idleness in prison increased sharply early in 
1934 due to the operation and the anticipated further effects of the Hawes- 
Cooper Act, and that although productive labor has begun to revive under 
the Compact there is at the present moment far less employment for prison- 
ers than there was in 1933 and before that date. They admitted that prison 
industry has been concentrated in the manufacture of garments to an extent 
that explains, if it does not justify, the complaints of that industry and 
of labor. They explained this c o neon t rati on as growing our of the follow- 
ing facto rs: 

(a.) the relatively small plant investment as compared with other 
forms of manufacture: 

(b) the degree to which sewing machine labor lends itself to effective 
prison management and discipline. 

"A large group of men, each anchored at a sewing machine, can be 
guarded with a minimum of supervision. They need not move about as in 
other shops and they use no tools that can be employed as weapons." To 
the suggestion that men in prisons working at this form of industry acquire 



9742 



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no knowledge that will help them- make a living when released, because 
outside prison similar work is done by women almost exclusively, they 
replied that such prisoners learn habits of industry and the discipline 
of shopwork. 

However, the more progressive members of this group admitted freely 
that there ought to be greater diversification of prison industry and that 
it should he planned and operated with the main emphasis upon its value in 
fitting the prisoner to make an honest living when released from prison. 
Ninety-four per cent of the men incaracerated are released, sooner or later. 
The large proportion who relapse into criminal activity (recidivists) 
suggests that imprisonment fails in its aim to protect society by stamping 
out the criminal tendency. Most serious crimes are committed hy former 
prisoners. A more thoughtfully conceived prison labor policy would be of 
outstanding value in society's war against crime. 

These same witnesses agreed that the Tsest plan to accomplish these 
constructive ends is the State -Use System. They pointed out, however, that 
its introduction on a comprehensive scale will necessitate large capital 
outlays for plant construction and that the States in which these expendi- 
tures are the .est needed are in many instances quite unable to raise the 
necessary fun^s. One State was mentioned where the needle trades are prac- 
tically the only prison industry, and where it has been necessary tc cut 
drastically school terms and teachers' salaries because the State's fi- 
nances are at such a low ebb. The Governor of another State has not merely 
demanded that the Compact be administered to as to afford an outlet for the 
goods manufactured in the prisons of his State, but has addressed a letter 
tc the President announcing that the State itself proposes to take legal 
action challenging the constitutionality of any action which would deprive 
the' state of its investment in its prison factory. 

In short, while this group as a whole favors the State Use System in 
principle, it emphasizes the practical difficulties that stand in the way 
of its general adoption. Therefore, its members urge that the Prison 
Compact be upheld and that practice under it be perfected; but they are 
positive that this can be accomplished only if the KRA label for prison 
'made goods is continued in its present form. In answer to the suggestion 
that this label differs only metaphysically from the ordinary HRA Blue 
Eagle label of commerce and therefore operates as an instrument of de- 
ception to which the Federal Government ought not give its sanction, they -' 
reply that under the Compact the labor of men in prison must, conform to 
the same standards of hours, compensation^ and sound working conditions 
as" are required for free workers. They tend to blink the obvious facts 
that compensation paid to a State by a prison contractor is not precisely 
the same thing as wages paid a worker for his and his family's support, 
and that many States operating prison factories on the State Account 
System justify the payment of merely nominal wages to their prisoners 
(often as low as 50 cents a month) on the ground that the State spends 
$1.00 or more per day to feed, house, clothe and guard each prisoner, And 
they ignore entirely the additional fact that goods made in prison and 
bearing the Blue Eagle label can by no stretch of the imagination be said 
to have been produced by labor invested with the right to collective 
bargaining. 



9742 



-127- 

THE AEGUUEFT OF OKGAFIZED LA3Q5. 

The witnesses for organized labor take a firm and uncompromising 
stand. They assert: 

(a) Co rcetition in the open market between goods made in prison 
and free labor production must cease a.t once. 

(b) The Hawes-Cooper Act is sound policy and good lav. 

(c) The Prison Labor Compact has no legal or moral right to an 
FRA Blue Eagle Label. The present form of label works a 
deliberate fraud upon the public and is unfair to labor. 

(d) To tnem the foregoing principles are so fundamental and so 
irrefutable that one of the principal witnesses in this group 
refused to discuss, even' bv way of assumption for the purpose 
of argument, such questions ?s (1) whether the differential 
allowed in favor of prison lao*r is so great as to defeat 
fair competition under the compact or (?) "hat, if any, 
administrative cnanges may ue desirable to bring about a better 
cooperation between the Prison Labor Authority and the several 
competing Code Authorities. 

This position is founded, says labor, upon long and bitter experience. 
Its spokesmen declare that they have aosol^tely no confidence in the 
Prison Group and refo.se to deal with them. Thev avow P hostility to 
the Prison Compact that admits of no compromise. Asked if they would 
prefer the unregulated and uncontrolled competition of prison labor if 
the Compact is dissolved they do not hesitate in their answer. They 
assert that general public sentiment agrees with them that prison made 
goods are "outlaw goods," that Congress has so declared in the Haves- 
Cooper Act, that many States have adopted supporting laws, and that 
Labor rill carry on its fight no matter what this committee or any 
other com littee may recommend until all prison made goods are driven 
off the competitive market. They assert tnat prison competition has 
brought wage levels in some places down. to $2 or $3 per week and that 
the Compact is powerless to control this evil no matter how or by whom 
it may be administered. Finally, they insist that every article of 
commerce manufactured in a prison means one less sucn article manu- 
factured by free labor. Therefore, with millions no" unemployed, they 
say that society must choose between giving la-'- breakers an opportunity 
to work or giving a like opportunity to honest men and women. Asked 
if, as tax-payers, they are willing to, support prisoners in idleness, 
thev say rather that than impose additional idleness upon the innocent 
and add another hundred thousano to the ranks of the unemployed who 
also must be supported out of taxation. 

However, these same witnesses abandon their pitiless logic when 
asked about the State Use System, tuite uniformly, they express approval 
of it and admit that upon grounds ooth of humanitarianism and of what 
they conceive to be sound economic doctrine, the State has a right to 
employ prison labor for the manufacture of products to be used by the 
State and its political subdivisions. They concede the penological 

9742 



-128- 

necessity of employing prisoners both tor purposes of discipline in 
prison and for the processes of rehabilitation. But this is the sole 
concession that Labor makes. It declares p ?r to the death on every 
other expedient. 

THE TESTIMONY OF STAJF uENBERS OF THE 
LEGAL AND OTHER DIVISIONS 
Or N. £.. A. 

These witnesses were very nelpful to us in clearing away numerous 
points of difference relating to the proceedings leading to the nrepara- 
tion and adoption of the Co ro?ct and the autaorization of the NPA label 
under the Compact. Kxpecially in regai d. to the latter, it had been 
charged by the Cotton Garment Industry not merely that the label is 
misleading and deceptible but tnat it '"as authorizec vitnout notice 
and put into use surreptitiously. These witnesses detailed to us the 
official steps taken in these procedures and also told of various 
preliminary conferences between recresentatdves of the interested 
groups. The importance of this testimony is reflected in our iinding 
III," (infra). 

They insisted that the regulation of -orison incustry must be 
committee to its own Prison Labor Authority Administrator and that it 
would be unsound and impracticable to transfer tnis iunction to the 
several interested and comoeting Code Autnorities and Administrators. 
But they conceded the desirability of developing a plan for the 
better co-ordination of these activities. They -^ave us convincing 
evidence of lack of- co-operrtion and obstructive tactics on the 
part of the Cotton C'-prment Code Authority during the montns that the 
Compact has been in existence. 

T Hh TES TI MONY OF PPOILSSOfi LOUI S f^ xt OBINSO F 

Professor Pobincon was the only witness '"hose testimony may be 
described as entirely objective. In theory, he favors the State Use 
System above all others; but he pointed out that in practice this 
system not onlv has failed to reduce idleness in prison but it many 
instances has increased it. This he attributes to several factors, viz: 

1. fviOst States that have adopted this plan passed imperfect lavs, 
A, State Use la" 7 , if it is to produce satisfactory results, 
must prescribe the compulsory purchase- by State agencies, 
departments, institutions, counties, and municipalities of 
all classes of goods produced in the State's prisons that 

are reouired by such agencies. . iassacnusetts is pointed out 
as the State that has devised and adopted the best Statute. 

2. He Questions the sincerity of some of the proponents of this 
system. For example, individual members of a certain organi- 
zation of manufacturers which is conducting an "educational 
campaign" 'for State Use are known to have tried, in States 
where the system is already estaulished, to restrict the 
purchase of prison made goods to institutions for the housing 
of prisoners. Similarly, the representatives of given 

^742 



-129- 



industries use -political press\ire end like means to secure 
the exemption of their particular industry irom the operation 
of the lav. For example, in the State of New York, though 
the orisons are eouipped to build furniture of all kinds, 
not a stick of school furniture is permitted to be made by 
prison labor. Certain labor organizations have been active 
in similar attempts to restrict the effective operation of 
the State Use System, in spite of tne fact that Labor gives 
the system its unqualified indorcement '"hen it is discussed 
as an abstraction. 

3. If the State Use System is to become effective in reducing 
prison idleness, each State employing it must conduct a 
careful investigation by competent production engineers to 
determine the needs of the State and of its political sub- 
divisions that can be supplied by the labor 01 prisoners. 
This must be followed by r thorough over-hauling of the 
State's setup of prison industry, always vith an eye to the 
following reouisites: - 

a. The safe confinement of the prisoners. 

b. The provision for them of real, productive '-ork on full time, 
as measured by free industry in like fields. 

c. The diversification of -orison products to tne greatest practic- 
able degree, so that no one product "ill monopolize the market 
to the injury of outside industry and free laoor. 

d. The selection, to as great a decree as possible, of industries 
for prison labor that tenr to fit the prisoner to make an 
honest living after his release, 

Frofessor Robinson admits that this ideal has not been realized 
anywhere up to the present time. But he attributes this primarily to 
the factors outlined in subdivisions (1) and (2) aoove and not to any 
weakness inherent ir- the System. 

J INS I Mas OF THIS COfcLHTTKE 

The foregoing analysis of tne testimony explains our findings, 
which are: 

I . The Prison Labor C ompact has not s o lved the problem o f prison 
labor and "il l not solve it perma nent ly and con structivel y, 

We arrive at this conclusion regretfully and with extreme reluctance, 
The Compac 1 '' was conceived as a great forward, step and was hailed by 
thoughtful ooservers as a major achievement. It aims to bring order out 
of chaos, to render justice to the men in orison without injuring 
industry and free labor out-side prison. It has failed for a number 
of reasons, some of which are so oeeplv rooted ?nd as far-reaching in 

9742 



-130- 



their social and economic implications that no mere modif ication of 
the terms of tne Compact j no improvement of the technique 01 its 
administration, Till overcome them: e.g.- 

a. The basic aims of labor pre incompatible with the purposes 
the Compact . 

b. The Cotton Garment Industry regards the Compact as unworkpble; 
and it is unworkable without the co-operation of that Industry, 

c. Other branches of Industry will come into similar conflict with 
the Compact if under it other prison products enter the 
channels of trace in sufficient volume to endanger such 
industries. They have a legitimate fear tnat the Compact 

and the use of the l=>bel in prison industries may tend to 
expand Mie market for prison made gooes and in the long run 
increase rather than decrease the problems of co roetition. 

I I . The Prison Labor Compac t is an indispensable -cart of any 

larger plan for th e' r eal solution of the problem of priso n 
l^bo r . But it Trust be regard ed as an interim measure . 

Though we find that 'the Compact has failed p.nd must fail of . 
achieving its final purpose, nevertheless it supplies the only practic- 
able means of regulating prison industry temporarily while a compre- 
hensive plan for the solution of the cuestion is being worked out and 
put into operation. This '"ill be elaborated in our Recommendations, 
infra . 

III. The Compact was the product of a genu i ne desire to solve a 
hard problem. It has been acminister e d fairly oy per s ons of 
the highest integr ity. Any past errors in it s administration 
hpve oeen only such as are inevitable in the development of a 
new instrumentality '. 

This finding is more important than might be supposed. The Compact 
must be kept alive and mast be supported' oy the hearty good-will of 
Frison Administration, of Industry, and of Labor; only its ultimate 
purpose and its duration must be modified. The success of any compre- 
hensive plan -"in be endangered ii the suspicions, iears, and charges 
of bad faith reflected in the testimony are allowed to persist. States 
of mind, especially when tinged by emotion or inflamed by passion, 
are the most stuboorn facts ol life. Success in this difficult enter- 
prise will be possible only if the Pfrties to tne conflict resolve to 
work together in a spirit of mutual confidence. 

IV. The only true solution of the prison labor p roblem is one that 
will effectu a lly re m ove the products of prison la b or frcm the 
ordinary channels of competitive trade and commerce. This 
means the State U s e System . 

Many of the reasons for this finding and the limitations upon its 
validity are set forth in our analysis of the testimony of Frofessor 
Louis N. Robinson, supra . It seems unnecessary to repeat them here. 

9742 



-151- 



1 e may add that though, under this system, goods made in prison do enter 
the field of use, and so compete with the products of free labor, this 
competition is made relatively innocuous because: - 

a. Such goods are kept off the general market; hence they do not 
affect the price structure in any "branch of industry. 

b. The labor that goes into the production oi such goods is not 
in direct competition ^ith free labor; thereiore -orison labor 
cannot become an instrumentality for lowering oi vsses and 
the degradation of free labor. 

V. The present and potential competition of p ri son industry with 
the Cotton Garment Indu s try has created a s pecial and acute 
problem that calls for immediate attention and relief. 

The testimony '" : e have heard sho^s that the principal friction and 
the most irritating conflicts have arisen between the Frison Labor 
Authority ard the Cotton Garment Code Authority. This is due neither 
to accident nor to merely personal differences. 

The Cotton Garment Industry is badlv over-expanded. This has 
been brought about in part through expectations aroused by the passage 
of the Haves-Cooper Act. As a result, prison competition, even on 
its present reduced scale, actually endangers tne life of the Cotton 
Garment Code. The withdrawal of that industry from its own Code would 
be a major disaster to labor, spelling a large increase of unemployment 
and a return to sweat-shop conditions that were a disgrace to American 
industry. This must be avoided at almost any cost. 

Here, again, the importance of maintaining Frison Labor Authority 
as an interim and emergency agency "becomes apparent. It is not for this 
committee to pass in detail upon the appropriate remedy for the immediate 
relief of that industry. But we assert that its effective relief is 
impossible unless, through the co-operation of Frison Labor Authority, 
under the Compact a simultaneous control is exercised over the com- 
petitive products of prison industry. 

If the price of the rehabilitation of tne Cotton Garment Industry 
should be a temporary increase of prison idleness and a temporary 
addition to the financial burden of the prisons, it would be a price 
worth paying - provided it is part of a comprehensive plan for the 
ultimate and realistic solution of the whole difficult problem of 
prison labor. 

^ar Committee believes that it has such a solution to offer. We 
have, in this letter of transmittal, attempted to point out some of 
the difficulties we faced when we undertook this investigation. At 
times it appeared that irresistiole forces were opposed to immoveable 
obstacles, that we should have to throw up our hands anc report that 
we saw no way oat of the mess. ! n the above findings ™e have hinted 

9742 



•132- 



at our remedy* This will "be stated definitely and fully explained 
in the body of our report. 



Respectfully submitted, 



Joseph N. Ulman, Chairman 



i'rank Tanrienbaum 



W. Jett Lauck 



James F. Davis, Secretary. 



9742 



-133- 

REPORT AMP RECOMMENDATIONS 

The Committee's recommendations look to a definitive solution of the 
prison labor problem. No partial alleviation is practicable. The 
conflicts of opinion and interest between the contending groups are so 
sharp that no compromise of the issues at stake is feasible, and even if 
feasible would not be desirable. No such compromise would endure beyond 
the day on which it was affected, and in a new guise the old issues 
would persist in burdening the conscience of the community. 

The specific issues that called this Committee into being were: 

A. The difficulties in the Cotton Garment Industry created by prison 
competition, and 

B. The complaints against the operations of the Frison Labor Compact. 

A. The Cotton Garment Industry and Frison Competition 

The conflict of interests between the Cotton Garment Industry and the 
prisons is acrimonious and of long standing. For many years penal insti- 
tutions have emphasized the production of cotton garments under a contract 
system and have marketed their products at prices which outside shops 
found difficult to meet. Prison labor competition made the maintenance of 
any standards in the industry outside progressively difficult, and forced 
the manufacturer into out-of-the-way places where child laoor, night 
work, long hours, and poor pay became the rule. It has been impossible 
in the past for the industry to acheive stability, to increase its wages, 
or to improve its standards, because of the lower costs of prison manu- 
facture. x he prison contractor haa the advantages oi iree rent, light, 
and heat, of low labor costs, and of a controlled labor force - there is 
ample evidence in the history of prison contracting that the disciplinary 
machinery of the institutions was often used to inflict physical punish- 
ment upon the prisoner who failed to complete his allotted task. The 
prison contractor supplied work for the prisoners and in one way or 
another added emoluments to the agents of the State who '"ere participants 
in the execution of the prison labor contract. The system served the 
contractor and the prison administration. It was, however, in many 
instances a bane and a curse in the lives of the prisoners, and the 
low-priced products kept wages do™n and the standard of living below a 
decent level for the workers outside. 

Against this system a ceaseless battle has been fought on the 
grounds that it perverted the prison to a factory for private profit, 
that it used the money of the tax payers and of the prison contractors' 
competitors to undermine and destroy their basis of income, that it led to 
political graft and malfeasance in office, and that it served no useful 
ends in the lives of the prisoners when released. This conflict has raged 
back and forth for well-nigh a century, with the prison labor contracting 
system gradually losing ground and bein^ replaced by other systems of 
labor more or less pernicious. But in spite of its decline, the prison 
garment industry still made 22,000,000 shirts in 1932, was still operative 
in 22 states, and still represented the greatest single labor activity in 
the prisons of the country. 

9742 



-134- 

The impact of the depression upon the Cotton Garment Industry ni9.de 
the affects of prison labor competition more keenly felt than ever, while 
the development of the National Recovery Administration not only brought 
the issue to a head but established machinery to deal with it on a 
national scale. Earlier attempts to resolve this problem -ere obstructed 
by the fact that prisons are state institutions, and that each state has 
a different policy. 

In some states the forces opposing prison competition achieved its 
abolition without supplying a satisfactory alternative for keeping 
prisoners at, work. In others the efforts of labor, industry, and in- 
terested social organizations completely failed to make any headway against 
the combination of prison contractor and local petty politics. The struggle 
culminated finally in an attempt to secure congressional legislation. 

The Hawes-Cooper Act, passed in 1929, prevented the sale of prison- 
made goods in states that had legislation prohibiting the marketing of 
such goods from their own institutions. The law was to b.ecome effective in 
five years, thus giving the states an opportunity to reorganize their prison 
industries to meet the prospective limitation imposed by the lav;. The five 
years expired at about the same time that the national Recovery Adminis- 
tration came into being. In the meantime, most of the states had neglected 
to make the necessary adjustments to meet the restrictions upon their abil- 
ity to market their prison-made goods, with the result that their problems 
became more acute. The reasons why the states had not set about preparing 
to meet the prospective limitations in the Hawes-Cooper Act are inherent 
in the very fibre of the prison system itself, and need not be here dis- 
cussed. The fact is that the states "just drifted," as was testified by 
one of the witnesses before the Committee. 

This lack of preparation on the one hand and the coming into existence 
of the National Recovery Administration on the other brought the issues be- 
fore the Federal Government as an immediate and inescapable conflict. The 
Cotton Garment Industry seemed at last to have found the instrumentality 
to secure its long-sought objective. It sought by one means or another to 
put prohibitory provisions into the industrial and retail codes to prevent 
themarketiiig of prison-made goods. It was going to achieve at one blow 
what fifty years of public agitation and striving had failed to secure. 

The prisons, .unprepared, and now being threatened with a virtually 
complete shut-down of the open market for their prison industries, were 
faced with a very real crisis; a sudden and large increase of idleness, de- 
struction of their capital investment, demoralization of their system of 
prison discipline. They were faced with the complete and immediate destruc- 
tion of the traditional system of penal administration which they had learn- 
ed to operate by custom and which by a slow process of attrition had become 
more or less satisfactory to themselves. They had neither the insight, the 
time, the money, the ■ experience, perhaps not even the desire to contrive an. 
alternative way of governing the prisons. Institutions, no less than in- 
dividuals, surrender their traditional ways slowly and grudgingly. Faced 
with genuine danger, they appealed to the Federal Administration for 
immediate relief. 

It was to meet the danger inherent in the National Recovery Administra- 
tion codes on the one hand and the failure of the state "orisons to adapt 
their industries to the provisions of the Hawes-Cooper Act on the other 
that the Prison labor Compact was developed. 
9742 



-135- 



The Compact, in brief, provides that the prison authorities set up 
conditions of fair competition in their prisons so as to meet the 
standards- imposed by the codes on outside industry. The compromise ps 
achieved was one that, for the moment, kept the penal institutions from 
shutting down their work shops and gave outside industz'y some measure of 
protection against the hitherto unrestricted and uncontrolled prices of 
prison competition, . 

The working of the Prison Comoact has since its adoption been 
subject to a great deal of criticism, especially on the part of the 
Cotton Garment Industry. And in this industry the conditions are such 
as to make the complaint very real and the necessity for relief urgent. 

The source of the grievances of the Cotton Garment Industry arise 
from the fact that 

(1.) The industry has unduly increased its outside plant and 
equipment. The new capital investment was mainly -motivated by the pros- 
prect of the withdrawal of prison competition under the Hawes-Cooper Act. 
In addition, ■ evidence- indicates that there was some further plant increase 
in 'the Cot.ten Garment Industry because the prospective influence of the 
National Recovery Administration seemed to point to a complete shut-down 
of prison industries. That there was some basis for this assumption is 
seen in the temporary exemptions granted by the National Recovery Adminis- 
tration for the training of apprentices in the new plants being developed, 

(2) The manufacturer of prison-made cotton garments was allowed a 
ten percent lower direct labor cost basis than out-side industry. This .. 
amounts to from two percent to three percent of the wholesale price of the 
merchandise, 

(3) The prisons operating on the State Account System are allowed a 
price differential of 12g cents per dozen, sufficient to provide a 
definite advantage in a .sensitive market. 

(4) Finally, the prison-made garment has, been' granted a National 
Recovery Administration label which is not easily distinguishable from the 
ordinary Isabel used in that industry by outside plants. The granting of 
the label by the National Recovery Administration may have been legal, it 
may in fact have been inevitable after the ad.option of the Prison Compact, 
liut it gives prison industry a kind of moral advantage it has never before 
enjoyed. 

Until the granting of the label, prison-made garments were always on 
the defensive, and their origin was frequently hidden by false labeling so 
as to deceive, the consumer. A number of state laws were, in fact, passed 
to prevent this deception. This function now comes under the auspices 
of the National Recovery Administration, and. the prison industry, as one 
warden expressed it, "has been recognized for the first time." The protest 
of the garment industry is both natural- and logical. The label tends to 
undo the effect of a campaign that has raged in the press and the pulpit for 
well-nigh a century. It makes prison goods respectable. It gives them a 
market free from opposition and makes the consumer incapable of distinguish- 
ing between prison and non-prison made goods. There is no question that 
the label tends to deceive, and that the prison contractor has secured the 
help of the National Recovery Administration in carrying out this deception, 
9742 



-136- 

To argue that prison conditions have changed so as to destroy the 
basis of the onus is, to raise questions on enforceability, questions of 
the rapidity with which social institutions change their character; and in 
effect it shifts the basis of the argument. It is clear that the attitude 
of the Government,' as expressed through Congressional action and through 
the reports of commissions, has been that it is undesirable social policy 
to promote profit-making industries in penal institutions. The action of 
the National Recovery Administration in granting the label tends in effect 
to promote and encourage profit-making industries in prisons. 

In the face of demand for increased '"ages, shorter hours, and 
improved standards for labor, competition with prison-made goods is made 
more difficult for the Cotton Garment Industry,- 

The position of the Committee is that the making of garments is from 
every point of view undesirable as a system of labor in the prisons; that 
it does not materially contribute to the ends of a penal sentence; that 
its effect upon the morale of the prison was in the past and in the future 
probably will continue to be unwholesome; that in view of the increase of 
outside plants and the changing standards enforced by the National 
Recovery Administration the continuance of prison competition is destruct- 
ive of the Cotton Garment Industry and endangers the standards of life and 
labor for some 165,000 people; and that, as the prison industry is 
insistent that it c»n survive only upon the favoring feature of a cost and 
price differential and upon the contributory deception involving the 
Federal Government through the National Recovery Administration label, it 
is better immediately and finally to remove prison-made garments from the 
open market. 

The Committee therefore proposes that the Federal Emergency Relief 
Administration temporarily parcha.se the garments made in the prisons. 
This temporary period should not last more than two /ears and should be 
on a declining scale in periods of three months during that time. This 
would give an opportunity to carry out the suggestions of the Committee 
in reorganizing the prison industries. It will also prevent the increase 
of the -federal relief rolls that must ensue if the competition of nrison- 
made garments is allowed to continue to absorb the work that would 
otherwise go to increase the labor of people outside of prison. It would 
immediately remove the source of contention of the Cotton Garment Industry 
that it cannot continue to meet the provisions of the codes of fair 
competition set up under the National Recovery Administration and increase 
the possibility of standardizing an industry that Has been the most . 
sweated and the least influenced by the pressure for higher standards of 
life and labor for the workers engaged in it.- It would also give the 
National Recovery Administration a real moral argument to push its 
insistence for higher standards and better enforcement in that industry. 
It would save the prisoners from idleness and the prisons from loss through 
a sudden destruction of an imnortant part of their industrial svstem, 
and it would give time to nlan and execute a different industrial system 
for the prisons looking toward the final abandonment of the Cotton Garment 
Industry as one of the chief occupational activities in penal institutions. 

9742 



S. The Prison Contact -137- 

The second immediate issue that "brought this Committee into being 
concerns the operation of the Prison Labor Compact. On the whole the 
situation is not so pressing as in the Cotton Garment Industry, for the 
other industries under the Co-many do not feel orison labor competition 
so keenly, and, excepting the Cordage and Twine Industry, where the 
problems are of a ver 1 / special character, the prison industries are not 
so large nor is their pressure against outside industry so effective. 
There is, however, sufficient evidence before the Committee to sho" that 
the situation is serious enough to re.iu.ire remedial a.ction, and that if 
such remedial a.ction is delayed the problem Till become more difficult 
and its ultimate solution less feasible. 

The Prison Compact is, as has already been indicated, a voluntary 
arrangement between the States to maintain within the orisons standards 
of cost allocation to sales price that will make prison industries 
comparable to outside industries. General agreement upon costs is, 
however, always affected by traditional differentials in both costs and 
prices. Assuming the best possible enforcement, the prison would thus 
still have guaranteed to it a certain edge upon certain parts of the 
market because of these differentials. Enforcement of the Compact, in 
viei- of experience, would be difficult to carry out and dubious in 
effect. But even with the best possible enforcement, the fundamental 
issues are in the main not different from those in the case of the 
Cotton Garment Industry. The Compact still involves the ITTLA. in securing 
and protecting a. market for a type of industry that the -sense of the 
American people as reflected o;f their representatives , at least, over 
a long period of tine and under many different conditions, has attempted 
to outlaw on what are claimed to be broad grounds of social policy on 
the one hand and narrow grounds of economic policy on the other. The 
KRA and the prison Labor Compact have inadvertently reversed this trend 
of policy upon this issue, have tended to prolong the existence of the 
condemned type of prison industry, have in return for compliance with 
certain demands as to working conditions and prices opened to it the 
prospects of a more secure market then before, and would, if no change 
were made, impose upon the irisons continuance of the financial and 
profit consideration in the management of their industries, contrary to 
the expressed judgment of their critics. 

There is the further specific grievance that the Prison Labor 
Authority has acted to change both cost and price schedules without 
consultation rr ith the Code Authorities affected. Denials and recrimina- 
tions one way or another do not seriously change the picture. Some 
remedial and corrective measures are essential even for the temporary 
period in "hich the Prison Labor Authority is to be accepted as an agency 
in the field, to meet the real danger that the Prison Labor Authority 
may, by developing interests and setting up expectancies , contribute to 
the freezing of the present prison industrial system, contrary to the 
repeatedly expressed policy of the American people as exemplified in the 
action of Congress and numerous State Legislatures. 

The immediate remedial action suggested by the Committee is there- 
fore to set a limit upon the expansion of the prison industries, by setting 
up quotas in the prisons to limit their production for the open market 
at a point no greater than the one existing when the Prison Compact was 

9742 



-138- 

established; and to provide that no changes in price or cost schedules 
be introduced in -orison industries without mutual agreement between the 
Prison Labor Authority and the special Code Authoritity involved. If 
necessary, an impartial chairman night be set uo whenever agreement is 
impossible. 

The Program 

But the prison labor -oroblem is more pervasive than the above 
discussion would indicate. The prison industrial system is an integral 
part of the very structure of the penal institution and must of necess- 
ity shaoe the lives of the -en and determine whether the effect rf 
imprisonment is to achieve those ends that the com unity has a right to 
expect from the penal institution. If the prison for one reason or 
another does not return to the community men strengthened in character, 
cleansed of )oor habits, better able to make social adjustments, if it 
does not reconstruct their way of life and make then less likely to 
follow the path of criminal depredations, then the -orison system has 
failed. If the men in prison do not come out hetter fitted to take 
their places in the community as citizens, then all the efforts of 
society, all of its e:cpenditures, of its manifold plans and programs 
for the combatting of cri :e break down at the point where the community 
has the greatest opportunity, the most time, and the best chance of 
achieving constructive ends with men who have failed in all other 
social relationships. 

For the prison is the final opportunity of the community to undo 
the evil already done, and to retrieve both its own failures and the 
failures of the individuals involve.".. It is these considerations that 
have motivated the opposition to the essential perversion of the -orison 
to a profit-making institituion. The true function of the -orison is 
neither to make profit for private contractors nor to make profit for 
the state. At its best the function of the penal institution is an 
educational one — education in the sense of re-creating a habit system 
adequate for social adjustment. To permit the arofit motive to inter- 
fere with this broader mrpose is to negate the function of the police 
and the judicial agencies, committed to the orevention of crime. The 
fact that so large a. mart of the men sent to prison continue in their 
career as criminals is evidence that tlie penal system now fails almost 
completely of these ends. This is not the nlace for a general essay 
on criminological reform. ' But it is the place to insist that no such 
reform is possible without an a.dequate prison industrial si'stem; that 
no industrial system which subordinates the functions of the -orison to 
the making of ->rofit can Meet the purposes of society; and that the 
present situation in regard to prison industry must change. 

Surely no one will deny that prisoners ought to have work in 
prison. But it is no corollary to this statement to say that prison 
industries must be run for profit. In fact, the greater measure of 
the difficulties that have arisen is due to a willingness on the part 
of prison officials to shift to the shoulders of priva.te contractors 
their burden of responsibility for contriving an adequate system. 

The only alternative to a profit-motivated prison industry is the 
development of the State Use System. That has been recognized for a 

9742 



-139- 



long tine, rnr, a iiu-iber of the states as veil a > the Federal Government, 
have abandoned the nroduction of goods for the open market and have 
confined 07 lav the manufacture of . prison goods to the needs of the 
states. The difficulties th t have arisen here are due mainly to t^o 
factors: first, on inadequate lav; second, inadequately equiemed and 
organized systems 0:' -jrison L dustry. An adequate lav requires that the 
public market — i-e., the market made by all ta-c-suo >orted institutions — 
shall oe reserved for the prison industries. An adequate prison industrial 
system is one that is sufficiently uiversified and equipped to he able 
to irodu.ce the great variety of things that the tax-supported institutions 
need, and that b r its diversity provides a limitation upon an undue 
concentration in any one industry, and wakes possible the kind of 
administrative and educational classification of the prison mo mla.tion 
needed to achieve the broader ends of the prison. An adequate lav 
requires compulsory purchase by all tax-supported institutions of the 
things that can be jrouuced in the prison; in turn, the prison must have 
eauroment and organization to meet the needs of the tax-supported 
institutions both as to quality and quantity. 

The States Use Lavs have been opt»osed for political reasons. The 
development of the state prison sysfceis has been neglected because of 
inefficiency, political considerations, and lack of funds. The prison 
•problem doe a not bull" large in the Kinds of the mass of people, and it 
has been allowed to drift without ruch consideration. Ue propose to 
solve the smeci'ic issues that iron ht this Committee into existence 
by making it possible for the states to develop a satisfactory 
industrial system if the states rill cooperate to the extent of passing 
a satisfactory States Use La*'. The lav of the State of Massachusetts 
might well be considered as a model for such purposes. If the states 
will so cooperate, then --e propose that the Federal Government, in 
consideration of the elimination of the difficult national problems 
which the com etition of prison industries has created, shall coomerate 
by providing the engineering staff to survey, and the funds to organize, 
a satisfactory prison labor system for each stake, At no time has the 
occasion been more appropriate nor the onportunity greater to do a 
constructive task in giving the American- people the kind of penal 
system that a civilized conimnity ought to have. 

Tie propose that the Public T7orks Administration set aside, subject 
to such modification, if pr^-j is fou a le ;rlly necessary, in the provisions 
of Section 206 of Title II of the National Industrial Recover-/- Act, a 
fund of $50,000,000 to be applied to surveying and reorganizing the prison 
industries of the states of the country as they pass the requisite 
legislation. Working in cooperation vith the Prison Compact Group, this 
fund would set mm an engineering staff to go into the cooperating state 
and make a comprehensive survey of the market available in the tax- 
suonorted institutions of the state, counties, and municipalities. It 
would then survey the prison and -plan the prison industries to meet 
those specific needs, -nth all the factors in the situation fully in 
vie". The Public TTorks Administration would then, ''oj contract with the 
prison, help set up ana overate this system of prison industries for a 
period of five years and set it well on its feet before withdrawing. 
!7e make no suggestion as to the conditions that the Public TTorks 
Administration would itself make in -providing the money. It already has 

9742 



-140- 

a basis in la 1-7 and experience to determine its conditions of cooperation 
with the states. 

Our insistence is that the requisites of an adequate law and a 
sufficient diversification he kept in view. T7e also insist that the new 
pirn be operated under contract with the prison authorities and ^ith their 
cooperation for a period of five years, which ought to be long enough 
to set the new model on s firm foundation in practice as well as in 
public opinion. The diversification, is important because it ,r ould do 
two essential things. It would make possible the reducing of pressure 
uoon any one industr;* - to a minimum. It would make possible for the 
first tine an adequately developed educational systen in the -orisons, and 
a genuine effort to :.ialre the -orison errjerier.ce something more than a 
resting period between one series of criminal depredations and another. 
TTith the help of the Public TTorks Administration a systen of educational 
ana occupational classif ications could be worked out in each -orison. 
The snail shops could be adapted to their industrial as well as their 
educational utility, and ^e might get at last a system of penal 
administration that would become a constructive rather than a destruct- 
ive influence in the lives of the men in orison and of society which 
has to determine how to provide for them. Ho such penal systen could be 
operated for long without raising the questions of whether the experience 
of imprisonment is essential in all of the cases in which it is now 
imposed, and whether societv could not achieve its o 1 n purposes in many 
instances by decreasing the number of individuals sent to prison. It 
seems logical to e-roect that the operations of such a systen of penal 
administration as is here outlined would lead to a strengthening of the 
very useful agencies of probation and parole, thus alleviating the 
problem of prison industries by reducing the number of men sent to 
prison. 

One of the legitimately proud boasts of the present administration 
is the abolition of child labor, which had so long been defended and 
maintained by a series of specious moral arguments and political 
chicanery. It seems to this Committee that in the possible contribution 
to a final settlement of the prison labor problems and in the reconstruc- 
tion of the penal systen which must be one of the results of such a 
solution, another step of perhaps no lesser significance would have been 
taken. The community as a -'hole mould acclaim such a solution of the 
prison problem, as it ha.s acclaimed the abolition of child labor. The 
Committee wishes to make it as clear and as impressive as possible that 
only by the doing of the larger thing can the narrower issues that called 
it into being solved. 

He con: lendation 

1. The Committee recommends that the National Industrial Recovery 
Board use its good offices with the President to set up through the 
Public Uorks Administration a fund of $50,000,000 for the purpose of 
helping the states meet the conditions specified in this report, so 
as completely to replan and reorganize their prison industries, removing 
or is on- made goods from the open market and finally bringing to an end 
the prison -labor controversy which has burdened American industrial and 
political life for so long a time. 

9742. 



-141- 

2. The Committee recommends that in the interim "between the present 
and the tine -hen the reorganization of the prison industries can he 
effected by the use of the fund suggested above, the national Industrial 
Recovery Board use its rood offices through the President and the 
federal Emergency Relief Administration to effect the purchase from the 
■orisons of prison- made garments, or to utilize the labor no-' employed 

on prison-made garments to make such other garments as the federal 
Emergency Relief Administration nay deem preferable. The purchase 
of these garments by the federal Emergency Relief Administration from 
the state orisons should be scheduled on a declining scale, and should 
cease at the end of two years. 

3. In addition to the immediate adoption of the above program, 
the Con littee further recommends that prison-made garments "be barred 

in the public market by the withdrawal of the national Recovery Administra- 
tion label no" attached to then, or by its modification to read "prison 
made 11 . The Committee suggests that a maximum of 15 days after the 
publication of this report be allowed to elapse- before the above pro- 
posal for the taking over of prison ■made garments by the Federal Emerg- 
ency Relief Administration be effected. 

4. The Committee recommends that the Prison Labor Authority be 
continued, and that its offices be used as the agency in cooperation 
with which the above program is to be carried out., and that the loss 
in funds to the Prison Labor Authority which nay. result from the 
withdrawal of the label or its modification be supplied from the 
funds set aside by the public Works Administration. 

5. The Committee recommends that an Executive Order empower the 
National Industrial Recovery Board to require an agreement between 
the Prison Labor Authority and the Code Authorities in the industries 
affected by prison-made products in ever'- instance of change in price 
or costs of products sold by the prison industries* Tf such an agree- 
ment cannot be had by mutual consultation, an impartial chairman 
especially designated for that purpose should be named. 

6. The Committee recommends that, by cooperation between the 
National Industrial Recoverv Board, the Prison Labor Authority, and 
the Code Authorities affected, a quota system be established for all 
prison industries, limiting their production for the open market at a 
point no greater than that which existed at the time the Prison Compact 
came into existence. 

7. The Comruttee recommends that if the above conditions be fully 
met then the remaining str>te, count; r , and city institutions now producing 
for the open market be brought under the Prison Compact. 



Joseph IT. Ulraan, Chairman 



Prank Tannenbaum. 



Jam.es P. Davis, Secretary 

Sl# W* Jett Lauck. 

9742 



-143- 

AFFENDIX E ... . . 

NATIONAL RECOVERY ADMINISTRATION 

FOR RELEASE THURSDAY . RELEASE 110.9029 

MORNING, NOVEMBER 29, 1934. 

' REPLANNING OF PRISON INDUSTRIES IN STATES TO REMOVE FRCDUCTS FROM 
OFEN MARKET RECOMMENDED TO NATIONAL INDUSTRIAL RECOVERY 30ARD 

A recommendation for complete replanning of the prison in- 
dustries of the states which will remove prison-made goods from the 
open market and end the longdrawn controversy on the subject was made 
to the National Industrial Recovery Board today by a special investi- 
gating committee. Use of $50,000,000 Public Works funds for the pur- 
pose was advocated. 

This group was created under an executive order issued by 
Fresident Roosevelt October 12 to investigate effects of competition 
between prison labor and sheltered workshop products on the one hand 
and those of the cotton garment industry on the other, and also on the 
operation of NRA' s prison labor compact. 

The report has not been acted upon by the Board as yet. It 
was required as part of the arrangement tinder which the Fresident, 
following extended investigation, required a shortening of the work 
hours in the cotton garment industry from 40 to 36, effective December 1. 

The committee, composed of Judge Joseph N. Ulman of Baltimore, 
chairman; Frank Tannenbaum, author and economist, and W. Jett Lauck, 
statistician, found that the Frison Labor compact "has not solved the 
problem of prison labor and will not solve it permanently and construc- 
tively," but "is an indispensable plan for the real solution of the 
problem of prison labor." 

The compact is an agreement between more than a score of states 
operating prison factories and the NRA for production of goods on a 
basis that should not put them on the market at a price lower than the 
products of private industry. The prison soods are given a distinct 
NRA label. 

The committee urged that until such time as the system it suggest- 
ed is brought about, the Recovery Board "use its food offices through 
the Fresident and the Federal Emergency Relief Administration to effect 
the purchase from the prisons of prison-made garments, or to utilize 
the labor now employed or prison-made garments to make such other gar- 
ments as the Federal Emergency Relief Administration may deem prefer- 
able." 

"The purchase of these garments by the FSRA from the state prisons" 
it continued, "should be scheduled on a declining scale, and should 

9742 



-143- 



cease at the end of two years". 

The ccmnittee also recommended that prison made garments be 
barrel in the public market by withdrawal of the F3A label now used or 
by its .modification to read "prisoi made." Lapse of a 15-day period 
after publication of the report was recommended before FERA should 
take over prison-made clothing. 

Another point was that the Frison Labor authority should be 
continued and use", as the agency to centralize the proposed program, 
and that NEA be empowered oy executive order to require an agreement 
between the prison labor authority and the various code authorities in 
every instance that prison industries make a change in price. Arbitra- 
tion was provided for in case of non-agreement. 

A quota system limiting prison production for the open mar- 
ket to the volume of output s„ the time the prison compact came into 
existence; was advocated, and that all state, county and city institu- 
tions now outside the compact be brought into tne new program. 

"The only true solution of the prison labor problem," said 
the committee in the section of the report devoted to findings, "is 
one that will effectually remove the products of prison labor from the 
ordinary channels of competitive trade and commerce. This means the 
stats use system.*** 

"The present and potential competition of prison industry 
with the Cotton Garment industry hps created a special and acute pro- 
blem that calls for immediate attention and relief. 

"The testimony we ha"e heard shows that the principal fric- 
tion and the most irritating conflicts have arisen between the Frison 
Labor Authority and the Cotton Garment Code authority. This is due 
neither to accident nor to merely personal differences." 

The committee blamed this condition on over expansion of the 
cotton garment industry, partiall; caused "oy expectations that the 
Hawes-Cooper act would greatly curb prison output. 

Declaring that prison competition even as now reduced "act- 
ually endangers trie life of tne Cotton G-arment Code, 1 '' the committee 
said : 

"The withdrawal of that industry from its own Code would be 
a major disaster to labor, spelling a large increase of unemployment 
and a return to sweatshop conditions that were a disgrace to American 
industry. This must be avoided at almost any cost." 

Temporary increase of prison idleness and a higher cost of 
prison operation was described as "a price worth paying" to for re- 
habilitation of the cotton garment industry, so long as the higher 
costs become part of a comprehensive plan for ultimate, realistic 
solution of the whole prison labor problem. 

9742 



-144 



No compromise, is held, "would endure beyond the day on which 
it was effected," and "no partial alleviation is practicable. The con- 
flicts of opinion and interest between the contending groups are so 
sharp that no compromise of the issues at stake is feasible, and even 
if feasible would not be desirable." 

The committee spent a month hearing testimony and reviewing 
material from an enormous list of witnesses, 'representing industry, 
organized labor and the prisons. 



9742 



APPENDIX F 

NATIONAL RECOVERY ADMINISTRATION 

IMMEDIATE RELEASE RELEASE NO. 9078 

Dec. 3, 1934 

The National Industrial Recovery Board today designated its 
chairman, S-. V.erj Williams and Sidney ittllman. member, and Linton Collins, 
division adrjinisbraboi to conduct negotiations with FERA to see if the 
latter can utilize prison labor garment production in the relief 
program, so as to remo/e prison-made clothing from the open market. 

This was in pursuance to the recently nubli^hed report on orison 
labor competition made Vy a suecial comni fcee under Presidential execu- 
tive order, in connection with the shortening of the work weak in the 
cotton garment industry,, 

The committee reported "orison production was endangering the 
status of this industry and the wages of its 185,000 employes. 

The hoard put off until it can gather more data, and legal and 
other opinions, the committees proposal for a $o0j000 : CC0 F.&i. urogram 
of reconstructing the r>snal syjtems of the states so as to take the 
prison factories finally out of competition with private industry while 
furnishing masdnpuu labor and braining to prisoners oy having them 
produce goods for state purposes only. 

It also deferred, pending further reuorts, action, on the 
proposal that the NRA label no'- used by prison plants under the prison 
labor compact be taken a^ay or be made to carry the words "prison 
made." 

Mr. Collins, who h^s administrative charge of the urison compact 
and other public-agency agreements of LTR&., was requested to find out 
the uossibilities of limi ting all -orison production by a quota 
system bas?d on the ou J :v n t of prison factories at the time the prison 
compact was put into efiect. 



9742 



-146- 

APPE1TEIX G 

COMiJBFTS OF THE PRISOE LABOR AUTHORITY 
OH TIE REPORT OF Till, UL;..Ar COhhlTIEE 

The report of the Committee (*) appointed by the National Industrial 
Recovery Board to investigate corapetition of the products of tie Cotton 
Garment Industry with the products" of Prison Labor, as directed by Exec- 
utive Order ho. 118-155, has been the subject of a thorough discussion 
by the representatives of the States Signatory to the Prison Labor Compact 
of Fair Competition and has also been given earnest consideration by the 
members of the Prison Labor -Authority. It was the judgment of all of 
those who examined the report that it was prepared by able and thoughtful 
men and merits the most serious and careful attention. 

The Ulman report evidences the profound interest of the members of 
the committee is penological questions and we commend the idealism and 
the progressive viewpoint on penal problems expressed in it. Thorough 
recognition is given by the Committee to the need of making imprisonment 
a constructive measure for the rehabilitation of those confined. He agree 
whole-heartedly and, therefore, wish to re- emphasize the statement of 
the Committee that "Surely no one will deny that prisoners ought to have 
work. "(Page 18). We hope that this principle will be accepted and given 
full recognition by all who must pass judgment on this subject. 

INQUIRY CURTAILED BY TIME LIMITATION 

However, it seems regrettable that the Ulman Committee was so limit- 
ed in time to complete and report upon the subject assigned to it because, 
in our opinion, it seems to have been unable tc give full consideration 
to all of the intricate questions involved. The speed with which the 
report was dr?fted probably accounts for the fact that the Committee^ 
recommendations and the solution it has proposed seem to push aside many 
difficulties which to us appear to be substantial. It also seems unfor- 
tunate that the Committee occasionally has used language not justified 
by any testimony in the record, and sometimes not in strict accord rath 
the facts. For instance, prison administrators are accused of lacking 
insight, time, money, experience, and even the desire to contrive an 
alternative way of governing the prisons. (Page 14). This accusation, 
levelled against these public officials, is predicated upon the assumption 
that they failed to prepare :or the conditions alleged to flow from the 
enactment of the Hawes-Cooper Act. Examination of the reports of the 
majority of the prisons of the country would indicate that a 'very large 
proportion of the prison administrators were fully aware of the need for a 
reconsideration of their prison labor policies. In many instances, they 
have been unable to secure the legislative support or appropriations to 
enable them to effectuate new policies. Moreover, the Committee's inter- 
pretation of the Hawes-Cooper Act does not appear to be in accordance with 
the intention of the Authors of this legislation or in conformity with its 
plain terns. 



(*)"The Committee" referred to throughout this report is the Committee 
consisting of Judge Joseph N. Ulman, W. Jett Lauch and Frank 
Tennenbaum, 



9742 



-147- 
MISIITTLRPRETATION OF IIAY/LS-COOPLR AC 



i 



Prison administrators did not fail to adapt prison industries to 
the provisions of the Hawes-Cooper Act for the simple reason that the 
Act itself declared no affirmrtive policy respecting the sale of prison 
goods. This act merely divested such goods of their interstate character. 
It left each state free to choose its own method of determining whether 
the sale of prison products shotild be regulated or prohibited, It per- 
mitted each state to apply to prison goods shipped into it the same 
rules prescribed for prison goods made sad sold in that state. Each 
state must c'etermine what emp] oyment would" b? provided for its urisoners. ,\ 
The fact that some states have- parsed no new legislation on this subject 
does not mean that these havo failed to carry out any affirmative duty 
placed upon them uy the Federal statute. The Hawes-Cooper Act per se 
is not mandatory. Its provisions become operative within any state only 
through the legislation of that state Legislative silence by any state 
means nothing more or less than tha+ such state believes no new policy 
or law would be an improvement over its existing policy. 

OPPOSITION TO PRISON LABOR 

Wfe also must reject the philosophy, which seems to underlie the 
report, that somehow prison-made merchandise is inherently vicious and 
injurious to the public welfare. The report seems to hold that there 
is no possibility of so regulating the sale of prison products in the 
open market so that such products can be made acceptaole articles of 
commerce. Su sh a philosophy not only fails to be in accord with a number 
of court decision?, but would also seem to make impossible a constructive 
answer to the prison labor question. This is unthinkable. Some way 
out of the' dilemma must be found. 

Tie admit the Committee has given ample evidence of the existence of 
strong opposition to the sale of prison made goods in the open market. 
This is no new phenomenon. Most of this opposition is based on tradition 
and springs from abuses which formerly characterized the production and 
marketing of goods produced by convict labor. V.*e understand the concern 
currently felt by free labor and industry and we realise that the 
depression Las strengthened, opposition to any unfair method of competion. 
At a time when law-abiding citizens are compelled to forego employment, 
it is natural tlr t the cry against prison labor and the sale of prison 
goods on the open market should be intensified. But the prison executives 
assert that not one scintilla of real evidence was produced before this 
Cemmittee to show that goods made under the Compact were competing unfairly. 

PHI SOU WORK SOCIALLY IMPERATIVE 

The present unemployment condition should be looked upon from a 
broad social view. Our concern must include not only free labor, 
but the labor of prisoners. Idleness as a factor contributing to 
social deterioration of the individual is intensified when the liberty of 
the individual to move freely is deniei. Labor in prison is primarily 
therapeutic. Its objective is not financial gain and while its results 
incidentally contribute to the reduction of the price which taxpayers must „ ; _ 
pay for the upkeep of prisons, its greatest value is as an instrument- 
ality through which prisoners may be rehabilitated. Broad social economy 

9742 



Ul48i. 

demands productive labor for prisoners. Failure to provide such is a 
failure of the state to function adequately in the discharge of one of 
its duties to itself and to o.ir who2.e social organization. With the 
exception of Minnesota- there is not a single prison in the country which 
really has productive employment opportunities in industrial pursuits 
for more than forty per cent of its p pulation. j^ost American prisons 
today are vast idle houres in which criminals, aimlessly milling about, 
create a situation which, fron the point of view of the prison adminis- 
trator, is fraught with serious con..;eouenees, and, from the point of 
view of the average citizen is full cf social danger. Such idleness 
renders it impossible to give efiect to the progressive penal philoso- 
phy expressed in the Ulman report. Certain it 13 that the country's 
general unemployment problem cannot he solved by throwing all prisoners 
out of work. 

PRISOU EXECUTIVES INITIATE ACTION 

Obviously, the situation demands constructive action. That the 
prison administrators th^mse'ir.-es have reali :od this is evidenced by 
the fact that they did not sit idly by and allow the depression con- 
ditions to overwhelm the.n„ They did not challenge the right of the 
Federal, Government to interfere with the rights of sovereign states 
"by code prcvi.dio.is whioh would curtail the effecti-enes^ of legal in- 
strumentalities of uie states for ths treatment; of law offenders. 
They freely offered to euoperate with [he Recovery Administration. 
For the first time in the hirtory oi the eo^itry, the states on their 
own initiative cooperated in the development of apian to meeb the 
issues of competition inherent in the marketing of prison lator products. 
Prison administrators did net wait for Lhe economy charting "by Congress, 
Early in 1933, when it was suggested that action would be considered 
looking toward an effort at "planned economy^, representative prison 
administrators met in New York and discussed the menace to prison manage- 
ment and discipline in certain proposed legislation emanating from a 
self-constituted committee. This meeting and o-hsis that followed in 
May and July developed and agreed upon four basic principles for the 
conduct of prison industries. 

HOW THE COMPACT WAS FORMED 

Shortly after the establishment of the I.R.A. early in July, 1933, 
these principles were submitted to. the Department of Lahor and to the 
N.R.A, representatives of the prison administrators contacted the K.R.A. 
with 'the srggestion that a separate code to govern prison industries 
should he adopted. Without committing themselves, the IJ,R.A officials 
encouraged this proposal. To make siu-e that the states would have 
knowledge of all that was involved in such a proposal, these administra- 
tors called a general meeting of representatives selected "by the governor 
of each state. Upon one week's notice representatives from 32 states 
met in Washington. They decided to present a code. Such a code subscribed 
to by 36 states was presented to the 1". R.A. After consideration, the 
N.R.A. determined it was impracticable because the II. R.A. was without 
power to enforce a code upon sovereign states. 

Prison administrators then proposed that the states by agreement 
among themselves should do what was proposed to be done under the code 
which had been submitted. Accordingly, a compact was agreed to by the 

9742 



-149- 

states and submitted to the N.R.A. Following consideration "by its legal 
branch and by several of its boards, certain verbal changes in the pro- 
posed compact were mg.de. In this new form it was again submitted to the 
states and was agreed to by the signatory states, 30 in number. When 
in final form, it was submitted to and was a 'proved by the President, 

This is an e lightening and an important record. It is documented 
completely in the records of the meetings of prison administrators, 
of the reprerents c: ves of the states and in the files of the department 
of the United States Government and of the several states consulted and 
concerned in its consumur ti on. This record is set forth in some detail 
here, as we believe such elucidation necessary at this time, not only 
becac.se the Ulman report seems to have accepted as fact some unfounded 
statements as to the attitudes of prison administrators of the states, 
but also for the reason that the Ulmanieport is such a significant doc- 
ument that those who are to consider it as a basis for action by state 
and national agencies should have all the facts necessary to a complete 
understanding of the matters covered in that report. 

The Ulman Committee found that the Compact was the product of a 
genuine desire to solve a difficult problem and urged its continuance. 
The Committee also found that the prison executives had made earnest 
efforts to cooperate with other code authorities, only to be met by 
rebuffs and arbitrary attitudes, But despite these set-backs, it is 
our opinion that the states will continue to seek a constructive sortition 
and, therefore, ue welcome the suggestions of the Ulman Committee. 

.DIFFICULTIES I1UIZRE: T T IN STATE-USE SYSTEM 

Subject to certain understandins and interpretations, the state- 
use S3 stem of prison employment should be a constructive method of solving 
the orison employment problem for the reasons so ably stated in the report 
of the Ulman- Committee, and its adoption should be facilitated greatly 
because labor and industry seem more willing to cooperate upon this, than 
upon any other compromise. 

But, the state-use system is not a universal panacea. We believe 
that the Ulman Committee has failed to consider sufficiently the difficult- 
ies inherent in any efforts to make this plan workable and practicable. 

First of all, we believe that the Committee's definition of the 
state-use s;;stem should be widened. It would aopear from the report 
that the Committee regards the state- use system of prison labor as 
one under which prisoners are engaged solely in the production of manufact- 
ured goods. 

We regard the state-use system as one under which prisoners may 
engage in any type of work paid for by public monies. We would inclu.de 
within, the definition the state-use such labor as that expended on public 
roads and other types of public construction, agriculture, mining, soil 
erosion projects, reforestation, flood control and similar projects, as 
well as the manufacture of articles for consumption by public institutions 
and ta.x sup sorted activities. 



9742 



-150- 



Another problem which we fear the Committee has neglected to con- 
sider fully is the attitude of the political subdivision of the state 
with regard to purchasing products .from state-operated institutions. 
It must be remembered tha-t since the beginning of democratic govern- 
ment in America, local governmental entities have been jealous of 
their rights and have sharply limited grants of power to states and to 
Federal Governmental bodies. In the United States, local governmental 
unites are particularly insistent upon the administration and the con- 
trol-' they exercise over purely local expenditures and the procurement 
of articles for local use. It has been s and is, no easy matter to 
overturn laws and customs grounded in generations of experience. This 
is a fundamental reason wry the state-use system of prison employment 
never has been wholly successful in any state, although it has been 
tried ~oy some stabes for over half a century. 

PUBLIC OPINION AND OTHER STATE FACTORS TO CONSIDER 

Another difficulty in providing an effective state-use system 
arises from the diverse economic and social conditiono prevailing 
in the different states. Predominantly agricultural states present 
problems quite different from those found in the more highly industri- 
alized sections of the country. It is als** of the utmost importance 
to take into consideration the public opinion of the state citizenry 
with respect to the various phases of the prison labor problem. In 
some instances, for example, a prison labor program including the sale 
of prison products on the open market has been approved by a vast maj- 
ority of citizens of a state because they sought a means to frustrate 
monopolistic or other conditions which they felt were inimical to the 
welfare of their state. In other localities, various interest groups 
within the state have been so strong that they have been able tc prevent 
the establishment of certain kinds of prison industries even though 
the products were to be sold only to state institutions and agencies. 

That these difficulties cannot be brushed aside is apparent when 
it is realized that none of the many states that have tried this system 
have talier. full advantage of its opportunities* Pressure groups in many 
of the states have been so successful in exempting certain industries from 
the provisions of the state-use lav; that prison administrators have heen 
deprived of the possibility of utilising the prisoners in the manufacture 
of goods of certain types for state-. ise. In the opinion of the Prison 
Labor Authority, there is not a single state in the Union which has been 
successful in operating the state-use system satisfactorily- It is true 
that some of the states committed + o a state-use system have provided a 
modicum of employment for their prisoners and may be in a better position 
in this respect than other states who have refused to abandon the sale 
of prison-made goods on the open market, but nowhere has it really solved 
the problem, 

THERE MUST BE EVIDENCE OF GOOD FAITH 

ilMa brings us to the most persistent obstacle to the adoption of 
the Ulman report by representatives of the states signatory to the Compact, 
They feel that they have compromised to the utmost and that now they can 
make no further concessions because the agreements they have heretofore 

9742 



-151- 

entered into have been repudiated and undermined by interest groups. 
The compact itself was a compromise on the part of the prison men 
and they believe that honest .s-ad sincere attempts to live up to its 
provisions have been frustrated by a minority industrial group which 
has shown complete inability end ur.wi] lingness to cooperate with the 
W a tional Recovery Administration or. v .his \v any other problem, if 
the National Recovery Administration could, for example, secure the 
adoption of a clause in Industrial codes of fair competition which would 
assure the prisons thai their utate--.iFe market:-- would not be infringed 
upon, or in some other way evidence the good faith of labor upon, or 
in some other way ^evidence the 'good faith of labor and industry to 
preserve state markets for the prisons, there would be little diffi- 
culty in getting the adoption of the principle of the state-use system 
wherever such system couJ d function practically as socn as the funds 
necessary to equip the prison industries were available. In a broad 
sense, it would become effective in practically every state in the 
Union* Some device, such a"- that just suggested, must be found that 
wil] give added support to the compulsory purchase clauses which now 
appear in the laws of only a few of the states and which must be part 
of evwy state-use lav;, for otherwise it may be impossible to secure 
the condition which the Ulmar Committee Peport (Page IS) properly 
recognizes, viz? chat n An adequate law require-, that the public market, 
i.e., the mar' : -de by all 1: ax- supported institutions, shall be re- 
served for the prison industries, n 

ACTION SHOULD Bl PREDICATED ON A COMPLETE SURVEY 

We are of the opirJ m that the difficulties inherent in the state- 
use system are so preplexing and pervasive that it is impossible to put 
the recommendation of the committee in this respect into effect in a 
hurried fashion* Because each state has its own peculiar problems 
we firmly believe that prior to any attempt to carry out the recommend- 
ations of the Committee there should oe a full factual research conducted 
which will permit the formulation of a law and the establishment of a 
system which is adapted to the conditions in each state. There is 
obvious need for surveys to be made by competent", trained persons 
cooperating with the respective state administrations, for the purpose 
of determining and evaluating all of the conditions which must be con- 
sidered in the formulation of an adequate prison labor program. When 
such a survey has been completed in any particular state, a prison em- 
ployment law may then be drafted which will embody so far as it is pos- 
sible the state--u.se feature. This problem which has baffled broadminded 
men ever since •• imprisonment as a form of punishment was introduced, 
cannot be settled hurriedly or by the fiat of some organization of 
the central government. N t one law governing prison labor in all states 
should be drafted, but an indefinite number of laws, suited to the con- 
ditions of specific state st Should the National Industrial Recovery 
Board decide to encourage or foster these surveys, which we believe 
absolutely essential, it would be desirable of course to begin work in 
those stales which today are the foci of the difficulty. Pending these 
surveys the Recovery Administration ought not, it seems to us, attempt, 
to exercise authority over prison industries as such action would be 
of doubtful legality. 



9742 



-152- 

We infer from the Committee's conclusions recommending the re- 
moval of prison-made goods from the open market within a period of 
two years that they -assume adequate state legislation can be secured 
within this period. The Committee ha,: evidently failed to take into 
consideration that all but a few of the states of the Union will meet 
in legislative session early in 1935 and that all but four or five 
of these states will not meet again until early in 1937, unless ex- 
traordinary sessions are called, Fbwor then ten states will meet in 
regular session in 193S* Consequently, any state-use law passed upon 
adequate research in each state connot possibly be drafted in time 
for the 1935 legislatures. 

SUGGESTIONS OF THE PRISON LABOR 
AUTHORITY RE RECOhiMENIiyjJlONS OP ULMAN COi.LiITTEE 

It is not, however, impc. foible for the Recovery Administration to 
cope with this problem, and bring about an improvement in the existing 
situation. Many of the recommendations contained in the report might 
well be adopted. 

RECCLavEHDATI ON HO. 1 

The Committee recommended (l) "that the National Industrial Recovery. 
B>«ard use its good offices with the President to set up through the 
Public Works Administration a fund of $50^000,000 for the purpose of help- 
ing the states to meet ^ho conditions specified in this report, so as com- 
pletely to replan and reorganize tlv;ir prison industries, removing 
prison-made goods from the open ma.'ket and finally bringing tc an end the 
prison 'labor controversy which has burdened America' s Industrial and 
political life for so long a time. " 

"V/e have attempted to make clear the difficulties facing the general 
introduction of exclusive stpte-use laws and to point out the type of in» 
quiry and the length of time -which it would take to introduce legislation 
which so far as practical would embody the recommendations of the 
Committee. It is obvious that the surveys recommended would prove 
costly and that there will be need for funds to carry on this work. 

We therefore, would favor any plan which would permit the allocation 
of Federal funds for the purpose of making the necessary preliminary 
studies" and to draft' the appropriate legislation for the consideration 
of the' respective state legislatures. Furthermore, the financial condi- 
tions of a large number of states would undoubtedly make 'necessary 
Federal support in order to put into operation some of the laws which 
might be enacted and many states would undoubtedly welcome such support 
although we are without information at this time upon which to base an 
estimate of the amount v.hich would be necessary for that purpose. 

At a meeting of representatives of 28 states- called to consider 
these recommendations, not a single voice favored the immediate adopt- 
ion of an exclusive state-use system. However, these men and women were 
unanimous in their willingness to begin the installation of state-use 
industries or to improve existing ones with Federal aid. None was will- 
ing to jive up the 'liieans they have of keeping prisoners employed until 
something had actually been developed to take its place. On the »ther hand 

9742 



as one representative expressed it, most of them ivere willing to turn over 
one group of inmates after another to an experiment in state-use just as 
fast as industries could be established and proved successful.. By such 
a program state- use might develop in any state to such a degree that it 
will be safe to discard all other systems. This plan was followed in 
Massachusetts from 1920 to 1934. 

An informal inquiry at the PWA discloses that there is not now 
$50,000,000 available and unalloted from the funds at their disposal. 
Since it will be desirable to proceed with preliminary surveys in the 
several states immediately and develop a program for each state, we 
believn funds sufficient for ruch surveys could more likely be qbtained.. 
As each survey indicated the amount of money needed to establish state- 
use industries, additional funds could be assigned. We estimate that 
not less that $1,000,000 would be essential at the beginning. 

We doubt the wisdom of establishing such a program under the PWA. 
The states will need every assurance that the work to be done will be 
undertaken by men experienced in prison work as well as in industry. 
We believe that either the Prison Labor Authority should be incorpor- 
orated as a federal Corporation under Title I of the id dA, to carry 
out the state-use program to be adopted or that a separate corporation 
should be created for this purpose. In suggesting that the PLA be used 
to effectuate the purposes of this program, we are not aiming to per- 
petuate that organization, If a corporation, the directors of which 
shall be different than those of the PLA, is formed, it should 
adequately represent the public, free industry, free labor, and the 
prisons. In either case we believe it essential that the agency to 
carry out the purposes of this program has the confidence of prison 
administrators in the states and be representative of then. 

While attention would naturally be paid first to these states where 
the problem of competition is most acute, we believe that states, like 
Connecticut and Nebraska, which are not nem selling on the open market 
but are in need of an adequate prison industry program should be encour- 
aged to avail themselves of this aid. Hence, all states now having, 
•r which later adopt, an adequate state-use program should be included 
under the provisions of the plan. 

It is important to define what constitutes an"adequate state-use 
law. In discussing this phase of the problem, prison men were emphatic 
in their declaration that it must include all tax- supported institutions 
and agencies; that it must contain a so-called compulsory purchase 
clause requiring all such institution,? and agencies to buy from prison 
industries wherever possible unless released from so doing by a prop- 
erly designated authority; that public worts and ways including highS 
ways aid perhaps even tax-supported relief agencies should be included 
under state-use, although it is not likely that prisons would avail 
themselves to any great extent of these outlets for obvious reason; 
and finally, that no adequate state-use law should, exempt any industry 
from being established in any prison, 

Finally, the representatives of the states would be opposed to 
any Federal grant the conditions of which would impose upon them 
either a program or a personnel with which they were not in agreement 

9742 



-154- 

or which was outside their control. The states .will accept any reason- 
able conditions provided they are consistent with local needs and statutes. 
Unquestionably they will gra?it any lederal agency the right to inspect 
audit, or recommit' d, but they do not wish unnecessary and impeding 
restrictions^ 

EECOIvDvDSllI^TIOH HO. 2 



"The Committee recommends ( ,2) that in the interim between the 
present and the time when the reorganization of the prison industries 
can be effected by the n?e of the funds suggested above, the National 
Industrial Recovery Board use its good offices throughtthe President 
and the Federal Emergency Relief Administration to effect the purchase 
from the prisons of prison- mace ga"ments, or to utilize the labor now 
employed on prison-made garms.its as the lederal Emergency Relief Admin- 
istration may deem preferable- The purchase of these garments 'by the 
Federal Emergency Relief ji.dmiv::'-stra + ion from the state prisons should 
be scheduled on a declining scale, and should cease at the end of two 
years. " 

This recommendation can only be considered in the light of the 
facts of the situation. Cotton garments are now being manuf actured 
in twelve prison factories - seven of which are operated under the 
contract system, three under a modified state-account system similar 
to the "cut-ma 1 '.e--Fni-trJ ra !l system of free industry, and only two are 
operated on an out-and- out-s tele-account system. In addition to those 
we must consider the potential production of such states as Nebraska, 
Kentucky, Connecticut, and possibly others with garment factories 
now closed down but which may reopen and produce for sale on the 
open market. 

The rate of production of the twelve prison factories operating 
at the present time is approximately 1200 dozen shirts and 1500 
dozen pants per day. The stock on hand probably does not exceed 
1,030,000 garments all together. W^ questions the expediency of 
requesting the EERA to purchase garments in such quantities from these 
prison factories. 

It is unlikely that any of the prisons operating under contract 
will give up their contracts and go into. State-account operation even 
if the EERA were to guarantee to take their entire output for any 
specified time. Some could not do so becau.se they do not own the 
equipment and such changes would require an outlay of capital which 
they do not possess. Others could not change the system without 
legislative sanction. For the FERA to purchase from the contractors 
would only aggravate the present problem; 

On the other hand if an offer is made to purchase all garments 
produced under state control and the Compact label is withdrawn sim- 
ultaneously, a reaction so disastrous would ensue as to nullify any 
constructive results which might c->me from the report of the Committee. 
We believe it is essential to consider 'this recommendation in its re- 
lation to the development of the whole state-use program and the limit- 
ation on sales of prison-made gsods on the open market proposed under 

9742 



-loa- 
the Committee's recommendation i T o. 6 belo 1 "'. After such limitations have 
been agreed upon, the FEEA can then decide what loortion of such goods 
thej r might 'be billing to absorb and the "orisons '"'ill welcome their co- 
operation. 

In other words we doubt the expediency of asking the FEEA to purchase 
for relief or state-use, cotton garments made under the -orison contract 
system., especially if such garments could be made by employable people 
now idle under the FERA work relief program, It nay be that the prisons 
should be allowed to produce unoer state-use not only cotton garments but 
other products for the unemployable just as they do for the insane, a.nd 
other people under the care of the state. Such production should not be 
limited to any period of time or to any specified amount. 

EECOijIENJA TIOH HO. 3 

"In addition to the immediate aiortion of the above program, the 
Committee further recommends (15) that prison-made garments be barred in 
the public market by the withdrawal of the ,T ational Recovery Administration 
label now attached to them, or by its modification to read 'prison made 1 ". 

After a state-use market for prison-made goods has developed to a 
point which would enable the withdrawal of all prison products from the 
open market, as we believe to be the intent of this recommendation, we 
would see no need for a continuance of the prison compact label or its 
modification, "e do deem it necessary . however, to maintain the present 
label for goods which cannot immediately be absorbed by tax-supported 
agencies. We believe the issuance of labels to any state might well be 
contingent on the acceptance by that state of a limitation on the sale of 
prison products on the open market as suggested under the Committee's re- 
commendation Fo. 6. 

In view of the foregoing, we do not need to comment upon the suggestion 
that "a maximum of fifteen days after the publication of this report be al- 
lowed to elapse before the above proposal for the taking over of prison- 
made garments by the Federal Emergency Relief Administration be effected." 

KECOKiSIDATIOlT MO. 4 

"The Committee recommends (4) that the Prison Labor Authority be con- 
tinued and that its offices be used as an agency in cooperation with which 
the above program is to he carried out and that loss in funds to the 
Prison Labor Authority which may be the result of the withdrawal of the la- 
bel or its modification, be supplied from the funds set aside by the Public 
Works Administration." 

The Prison Labor Authority is anxious to cooperate in every way with 
the National Industrial Recovery Board to carry out any program which is 
practical and which will put into effect the penal philosophy expressed in 
the Committee's report, namely, that each prison shall have labor adequate 
for rehabilitative purposes. Undoubtedly there will be a continually, in- 
creasing loss in funds to the Authority due to the limitations placed on 
the sale of prison products in the open market and the development of 
state-use. In time the Authority probably w uld be unable to function 
satisfactorily without securing some additional financial support. In this 

9742 



-156- 

connection ™e ro ish to point out that the Prison Labor Compact gives to the 
Authority no jurisdiction over goods produced for state-use and that unless 
the Compact he modified and the modification generally adopted by all the 
states, the pow^r of the Authority to cooperate with the program outlined 
will remain definitely restricted. Unless the PLA. becomes the agency to • 
carry out the suggested program as well as its present functions, or unless 
the suggested Corporation should receive from the signatory states the 
power and duties of the PLA under the Compact, it will be necessary for 
the PLA. to secure .^rom the states jurisdiction over prison products made 
for state-use and authority to levy assessments on them for its support. 
Such authority can come only from the states signatory to the Compact. 

KKCOMMEIIDATT OU NO, 5 

The recommendation (5) that the agreement of the Code Authority af- 
fected shall be secured by the PLA "in every instance of change in price 
or costs of products sold by prison industries'' is neither practicable nor 
just. The policy followed by the PLA in determining such price author- 
izations has been approved by the iffiA sua. full information has been filed 
with the Cole Authority affected and opportunity given to the Code Authority 
to protest or appeal; therefore the rec-ona endation appears to be wholly 
unnecessary. In addition the burden imposed upon the PLA in securing an 
agreement as to price changes in every instance would prove so cumbersome 
as to defeat the need for action. Such changes ofren cannot wait on the 
calling of joint conferences and the reaching o.f agreements, especially 
where the conflict of interests is so strong. Sales are made or lost 
often in the space of a few hours. No industry could function under such 
an arrangement. The suggestion that an impartial chairman be especially 
designated to arbitrate disputes as to price changes is already nrovided by 
Section V of the Compact which authorises the President or his representa- 
tive to review any decision of the Prison Labor Authority, Until the re- 
medies provided by the Compact are availed of and experience demonstrates 
these to be inadequate we cannot admit that the system now provided needs 
modification. 

KECCiflffiflDATTPN IIP. 6 

The Committee recommended (6) "that, by cooperation between the 
National Industrial Re every Board, the Prison Labor Authority, and the 
Code Authorities affected, a quota system by established for all prison 
industries limiting thsir production for the open market at a point no 
greater than that which existed at the time the Prison Compact came into 
existence". 

Most prison men win agree to a. limitation of their sales on the open 
market provided other means are provided of caring for their idle prisoners. 
Indeed the acceptance of such limitation might be a condition of the grant 
made to set up state-use industries with the aid of Federal funds. Pro- 
vision for limitation of output of prison industries "in fair proportion 
to the industry affected" and prohibition of "the expansion of anv existing 
prison industry which bears a disproportionate share of competition" are 
provided for in the Compact. The PLA has approved such action and appoint- 
ed a committee to assist in working out this policy. They have offered to 
meet in joint conference with the Cotton Garment Code Authority to discuss 
the application of this principle to the cotton garment industry. They 

9742 



-157- 

have discussed it with the Binder Twine Agency of the Binder Twine and 
Cordage Code Authority. In fact approval of reasonable limitations in 
both these industries was expressed by the representatives of the states 
affected at the recent meeting of the Association of States Signatory. 

Naturally such limitations will necessarily be based on a separation 
of intranstate and interstate markets, and conform to local statutes and 
conditions in each state. The suggest 021 of the Committee that "production 
for the open market (be established) at a point no greater than that which 
existed at the time the Prison Compact came into existence", may be used 
as a point c.f reference, but such quotas must necessarily depend on the 
constantly changing state of the free market as well' as on other factors 
already mentioned, What may be proper in 1934 might be unwise in 1935, or 
again the production of hosiery for s r ile on the open market in April, 1934, 
might be a satisfactory limit for the industry but the production of binder 
twine at that time might be unsatisfactory to the cordage industry. Each 
quota must be worked out in the light of the needs of its o"m industry and 
the states affected. 

The Committee has expressed the hope that their recommendations 
"might get at last a system of penal administration that would become a 
constructive rather than a destructive influence in tne lives of men in 
prison". rr e might further this aim and provide for idle prisoners if the 
FERA would establish for unemployed doctors, dentists, nurses, teachers, 
occupational therapists, case-workers, psychologists, welfare workers, re- 
creation directors, and parole officers "work pre /iects" in prisons cooperat- 
ing under the proposed program. Su r J,* activities should materially reduce 
the number cf idle inmaies > help solve difficult disciplinary problems, and 
promote a rehabilitation program for which the average warden now has only 
one answer, viz: - a constantly diminishing industrial program. 

EECOiMEEDATIOr IIP. 7 

The Committee's recommendation (7) that "the remaining state, county 
and city institutions now producing for the open market be brought under 
the prison Compact" is in accord with action already taken by the PLA. 
It awaits only the approval of the iJBA and the local institutions affected. 



9742 



-158- 

APPEITD IX H 

A PLAN THEREBY THE FEDERAL (&yERNMENT MAY ASSIST 
THE SEVERAL STATES TO ABOLIoH UNFAIR COMPETITION 
IN PRISON INDUSTRIES. 

1. In the uain the purposes sought to he accomplished hy the re- 
ports of the so-called Ulman Connittee and the Prison Lahor Authority 
to the national Recovery Ad.miuistra.tion and approved hy the National 
Industrial Recovery Board for the solution of the problem of nrison lahor 
in the States, have my approval. 

2. Any State which hy legislation or otherwise shall permanently 
adopt an adequate State-use -orison lahor system, or shall give reliahle 
assu.rance of its .imnediale intention so to do, msy apoly for a grant from 
the Eederal Emergency Administration of Public Works under clause "G-" of 
Section 1 of the Emergency Relief Appropriation Act of 1935. 

3. After., an adequate snrveyl end subject to the provisions of Ian 
and the fundamental principles established under Executive Order 7034, 
and upon conf orm - ' ty with other regulations of the Eederal Emergenc3 r Admin- 
istration of Public Works, a grant may he made of a sum sufficient to pro- 
vide for the nee e ssary expense of changing the existing prison lahor sys- 
tem in any given State ever to the State-use system. 

4. During the transition, period and for not to exceed two years, 
the Eederal Emergency Relief Administration and other government agencies 
may purchase garments and textile goods from State penal institutions, 
provided the sale of these goods is withdrawn from the open market. 

5. The Executive Director of the Eederal Emergency Administration 
of Public Works shall consider in each case whether such grant shall he 
made availahle upon application of the State governments and shall deter- 
mine whether the fundamental principi^n are heing follcaed and what 
amounts, if any, should he advanced hy the Eederal Government. 

6. The Executive Director of the Eederal Emergency Administration 
of Puhlic Works in order to determine whether the applying State has met 
the special conditions laid down in paragraph two of this memorandum may 
appoint an advisory coLitlttee to inquire into the facts in each case and 
advise him whether or not such State has substantially conformed its 
prison lahor system to the State-use principle. Such advisory committee 
might consist of — one memher appointed hy the National Recovery Adminis- 
tration, one hy the Prison Lahor Authority, one appointed hy the American 
Federation of Lahor, one appointed hy the United States Chamber of Com- 
merce and one hy the Department of Justice. 



9742 



-159- 

7. This memorandum is intended merely to give general approval to 
the principle of assisting State governments xrho desire to do so to in- 
stall State-use prison industry systems and is not intended to give 
approval to any particular project. 

^t ;'« ^e Jjc ^ ^« % :£ v si' * * * * * 



Such su.rvey may provide employment for a considerable number of "uhite 
collar" TTorherc , 

2ffb.il e it is understood that State Governments are to initiate such 
projects, the Prison Labor Authority or Bureau of Prisons might con- 
veniently serve as a coordinating or standard setting agency. 



9742 



-160- 



APPE:n)i:t i 



July 23, 1935. 



To Prentiss Coonley 
From Linton M. Collins 



For over a hundred years, there has been an aggressive warfare 
against production of goods for the open market o-j prison labor. There 
is a realization and universal admission that prisoners must work. 
However, the feeling has: generally teen that the ooher man's fields 
shall! "be reserved where there is to he any competition "between prison 
labor ana free labor. In the c?iiemma with which -orison officials have 
been confronted, there has of necessity, been a resort to manufacturing 
operations and this has chiefly been done by contractors who have ex- 
ploited -orison labor. The industry most affected by this has been the 
cotton garment. Their organized warfare has been more intense than 
that of any other industry bordering, at times, on guerilla tactics. 

After the passage of the National Industrial Recovery Act, the 
cotton garment industry thought tha J they had found an opportunity to 
sound the deathknell to theii great bag-a-boo, and than henceforth 
the codes should out lav: any production by forced labor. In spite of 
the demand of the cotton garment interests for control of this problem, and 
the threat that ih%-would not submit to a code unless the orisons did 
also, it was recognized that the stats prisons could not be subjected 
to a code* However, a provision was incorporated in the Cotton Garment 
Code affecting orison laoor and more particularly in the Code of Fair 
Competition for the Retail Trp.de which was approved prior to the Cotton 
Garment Code as follows: 

"Pending the formulation of a compact or code between the 
several states of the United States to insure the manufacture and 
sale of prison-made goods on a fair competitive basis with goods 
not so produced, the following provisions of this Section will be 
stayed for ninety (90) days, or further at the discretion of the 
Administrator: 

"(l) \/here any penal, reformatory or correctional institu- 
tion, either by subscribing to the code or compact hereinbefore 
referred to, or by a binding agreement of any other nature, sat- 
isfies the Administrator that merchandise produced in such insti- 
tution or by the inmates thereof will not be sold except upon a 
fair competitive basis with similar merchandise produced in such 
institution or by the inmates thereof will not be sold except 
upon a fair competitive basis with similar merchandise not so 
produced, the provisions of paragraph (2) hereof shall not apply 

9742 



-161- 

to anv merchandise produced in such manner in the institutions 
covered by such agreement. 

"(2) Exceot fs orovided in the foregoing oaragra.oh, no re- 
tailer shall '"nowinglv ouy or contract to buy any merchandise pro- 
duced in whole or in _ oart in a penal, reformatory or correctional 
institution. After Hay 31, 1934, no retailer shall knowingly 
sell or offer for sale such merchandise, i'othing in this Section, 
however, shall affect contracts, which the retailer does not have 
the ootion to cancel, made with resoect to such merchandise before 
the amiroval of this contract by the President of the United States. 

The prison interests were not derelict in a desire to meet this. 
As early as July, 1933, the American Prison Association called a meet- 
ing to which renresentatives of the penal institutions or ooards of a 
number of states went, and at which tine they adopted a resolution 
that for their manufacture , they oresent a Code of Fair Coraoetition. 
Even though these interests were alert, it was determined that legally 
the states could not be subjected to a code and after many conferences 
a voluntary agreement was decided uoon which resolved itself into the 
Conroact of Fair Comoetition for the Prison Industries of the United 
States of America. This was approved by the President on Anril 19, 
1934 and a Prison Labor Authority, consisting of three presidential 
members representing respectively, labor, industry and consumer, and 
six representatives of the orisons, selected from their own grouo was 
apoointed. This Prison Labor Authority organized immediately after its 
approval and elected Samuel Lewisohn, Chairman, John J. Hannan, Vice- 
Chairman and James V. 3ennett, Executive Secretary. Thereafter, Howard 
B. G-ill was chosen as Executive Officer and Economic Adviser. 

First efforts on the part of the Prison Laoor Authority were to 
secure permission to use a.n "IRA. label that they might be able to market 
prison labor goods in accordance with the Comoact and meet the prices 
set oy the Cotton Garment Code and the Hetail Code. Administrative 
Order V-2 was aoioroved and later amended oy Administrative Order V-3 
which granted then a label under date of June 12, 1934. Strict rules 
and regulations were reauired for' the issuance of these labels. Com- 
olaints arising as to misuse were few -^nd^vere' general'!?/ coJrectecL.upon 
reouest of this Administration. There ',?ere issued under the two orders 
from May 15, 1934 to June 1, 1935, a total of 2,815,000 labels for 
work shirts and a total of 2,195,600 for work oants. So far as we 
know the only shirts manufactured and olaced upon the open market with- 
out labels in violation of the Comoact were some made in Florida and 
in Indiana. 

The Prison Labor Authority's first urogram was to diversify in- 
dustries in the prisons of the country. The results of this can easily 
be seen in the manufacture of cotton garments. Prior to the National 
Recovery Administration, there were eighteen states oroducing cotton 
garments for the ooen market. luring the Calendar year of 1932, there 
were 21,850,876 work shirts and 8,096,947 work oants manufactured in 

9742 



•162- 



prisons and sold on the ooen market. Since the Compact of Fair Com- 
petition this has been narrowed down to ten states, of which Delaware, 
Florida, Indiana, T laryland , iiichigan, Missouri, Oklahoma, Tennessee 
and 'est Virginia manufacture work shirts and work -cants and South 
Carolina manufactures underwear, During 1934 there were produced in the 
prisons of the above-mentioned states 2,311,172 work shirts and 3,247, 
620 work pants. In the free market, and under the Cotton Garment Code 
Authority, there were produced in 1934 59.657,000 work shirts. The 
prison production of 2, oil, 172 is 4, 5 i of the total production for the 
United States, This contrasts with an estimated oroduction in prisons 
during 19Z2 of 25fo, Under the Cotton C-arment Code Authority, there 
were produced in 1934 74, 392 t 000 work pants. The prison production 
for 1934 of 3,247,620 ir 4.2'j of the total production for the open 
market. These decreases evidence the present competition as oeing de- 
cidedly in the decline. In 1932 there were 13,948 prisoners used by 
the eighteen states in manufacturing cctt.on garments for the, open 
market. The total number of prisoners now being used on cotton garments 
in the ten states mentioned above is 3.049. 

In the fall of 1954, the President imposed a thirty-six hour week 
upon the cotton garment industry. Immediately, the Prison Labor Auth- 
ority advised all orisons manufacturing cotton garments that in .ac- 
cordance with Article II of the Compact, each prison must not operate 
its cotton garment industries in excess of thirty-six hours. So far as 
^e know this was met by every -orison in the country, nevertheless, 
the cotton g-rment industry continued to complain about the intolerable 
burden imposed uoon them by co.Toetition from the Prison industries. 
The Hotchkiss Committee ,?as appointed to make investigations, as to 
whether or not the industry could stand the thirty-six hour week. This 
Committee recommended that the President appoint a committee to make 
a very definite study of the competition of products of the cotton 
garment industry with products of prison labor. 

In accordance therewith, the President on October 12, 1934, ap- 
pointed the Ulman Committee, composed of Judge Joseph II. Ulman, as 
Chairman, Frank Tannenbaum and ',/. Jett Lauck. Mr. Lauck was a member 
of the Hotchkiss Committee. The sum and substance of the recommendations 
of the Ulman Committee are that fifty million dollars be set aside for 
the purpose of helping the states to reolan and reorganize their prison 
industries, remove prison made goods from the open market and bring to 
an end the prison labor controversy which has burdened American indus- 
trial and political life for over a century, '.-hile this program was 
being developed, after adequate surveys were made, it was recommended 
that the Federal Emergency Relief Administration purchase and use such 
prison made garments as were then being made in prisons and immediately 
relieve the open market of this competition. Several conferences were 
held with the FEPA officials and it was tentatively agreed that such a 
program could be developed as far r. s that end of the program wa.s con- 
cerned. 

nevertheless, the prison group answered the recommendations of 
the Ulman Committee, urging, first, that adeauate state use laws be 
made compulsory eefore any relief or aid be granted to the respective 

9742 



-163- 

states and that a corporation "be set ui to make an adeouate survey of 
the needs of the respective states oefore any permanent program was 
undertaken and that in the meantime it oe a condition precedent to the 
granting of federal aid that limitations be set for the sale of pro- 
ducts on tne open market, by -orisons and that a certain program be 
worked out through the FERA, using ur employed and preventing other 
idleness to penitentiaries. 

The -orisons of this countiy are engaged in some sixty industries, 
a list of which is attached, hut the competition is negligible except 
in the cotton garment field which um ; er the Connect has been reduced 
to an almost negligible figure, and in the binder twine industry, 
the furniture industry, and the marking device industry and the farm 
machinery industry. 

Thirty-one st-tes and the District of Columbia have signed the 
Conroact. Coo-oeration of the part of the orison officials was much 
grea.ter than was anticipated. 

The National Industrial Recovery Board on Hay 27 adopted the 
following resolution in connection with the -orison program. 

"i. The desirability of utilizing at> proximately 
$50,000,000 of the relief fund to enable tne states completely 
to renlan and reorganize their "orison industries and prison 
welfare activities, remove piison-nade goods from the o _ oen 
market through diversification for state use, and finally 
bring to an end the "orison labor controversy which ha.s 
so long burdened American industrial and political life. 
To this end it will at once suggest to the President. 

"(a) The desirability of establishing an agency, 
-oro-oerly representative of the interests^ concerned, to 
coordinate and supervise this work. 

"(b) The desirability of at once placing the Divi- 
sion of Research and Planning of N.R.A. in charge of 
the necessary survey. (The survey should be under 
way within a week). 

"2. The desirability in the interim between the present 
and the tine when the reorganization of the -orison industries 
can be effected it~j the use of the fund suggested above of 
having the Federal Emerge ncv Relief Administration effect 
the purchase frpm the prisons of prison-made garments and 
other products or arrange for the labor now employed on 
prison-made garments to be utilized to made other garments . 
for such". purchase. The purchase of these garments by ... 
the Federal Emergence Relief Administration from the state 
prisons should be scheduled on a declining scale, and should 
ceas at the end of two years. ■ • 

9742 



-164- 

"3. The desirability of establishing "by cooperation 
jetween the. Hat ional Industrial Pecover^ Board, the Prison 
Labor Authority, and the Code Authorities affected, a 
quota system for, all orison industries, 

"4. In the meantime the question of an appropriate 
label for an" - gouds going in to the open market will be 
reexamined bv the N.R.A. " 

The next steos to be taken in this matter are "oresentation of 
the Board's action to the President and an ascertainment from him 
as to whetner or not he desires this urogram to be pushed. If so, 
it will be necessary to set iro an agency to carry out this program. 
While this is being done, it is felt certain that the relief of the 
cotton garment industry can be obtained through relief with the FERA. 
It has been estimated that such a program cculd utilize at least 420 
white collar relief workers in malting the necessary surveys, and based 
on estimates b~ ? the U-xian Committee', if the various projects anticipated 
are approved in the thirty or forty states now manufacturing -orison 
products, they should, by the spring of 1936, provide work for ap- 
proximately 7,000 workmen making materials and equipments and for 7,500 
construction workmen in the rebuilding of orisons and the setting up 
of adequate machinery for the purpose of meeting the contemplated pro- 
fram for the diversification of industry. In other words, the $50,000, 
000 to be allotted as follows; $35,000,000 to be used for equipment, 
materials, representing the labor of 5,000 industrial workers and $25, 
030,000 to be used for construction, of which $15,000,000 represents 
labor for 7,500 workmen and $10,000,000 represents the material for 
2,000 industrial workers. Altogether, this program can provide work 
for at least one year for approximately 2,000 white collar workers and 
15,000 construction workers and set in operation the means of reorgan- 
izing the prison program in line with the Report of the Ulraan Committee. 
It is estimated that if the Prison Industries Reorganization Administra- 
tion is set up that possible $1,000,000 can cover the expense of the 
surveys and the Administration. 

There is attached a copy of the Compact of Fair Competition for 
the Prison Industries of the United States of America, the> Report of 
the Committee on Competition of. Products of Cotton Garment Industry with 
Products of Prison Labor as Directed by Executive Order Ha. 118-135 of 
October 12, 1934, better known as the Ulman Committee Report, the Comments 
of the Prison Labor Authority on the Report of the Ulman Committee, a 
copy of the Prepared Statement on the Prison Labor Compact prepared for 
the Senate Finance Committee, a copy of the memorandum on the history 
of prison products prepared for Mr. Hamilton by Mr. Jajnes Porter Davis, 
a cop - '- of the memorandum of May 29 with a copy of the Executive Order 
creating the Prison Industries Reorganization Administration, which was 
forwarded to you, a copy of the memorandum of April 18 sent to Dr. 
Marshall, and a copy of a Plan to Effectuate the Recommendations of the 
Ulman Committee He Prison Competition. 

I should appreciate your returning these memorandums after you 
have read them, so that we may have them in our file. 

9742 LI1IT0H !". COLLIIIS 



-165- 

APPENDIX J 
EXECUTIVE OBDEB ¥0. 7194 



"ESTABLISHMENT OF THE PRISON INDUSTRIES REORGANIZATION 

"ADMINISTRATION 

"By virtue of and pursuant to the authority vested in me "by the 
Emergency Belief Appropriation Act of 19o5 5 approved April 8, 1935 
(public Resolution No. 11, 71th Congress), I hereby establish an 
agency within the Government to he known as the ^prison Industries 
Reorganization Administration' . 

"The .governing bod.} of said Prison Industries Beorganization 
Administration shall be a priron Industries Beorganization Board 
consisting of five members to be hereafter appointed by the president 
and to hold office at nis pleasure. The Prison Industries Beorganiza- 
tion Board is hereby authorized to prescribe such rules and regulations 
and to delegate to its agents and representatives such powers as, in 
its discretion, it shall deem necessary and proper for the performance 
of the duties and functions of the Prison Industries Beorganization 
Administration and for effectuating 1 ,he purposes of this Order. 

"I hereby prescribe the following duties and functions of the 
said Prison Industries Beorganization Administration: 

"(1) In cooperation with the proper authorities -of the several 
States and the political subdivisions thereof and the District of 
Columbia: 

"(a) To conduct surveys, studies, and investigations of the 
industrial operations and allied activities carried on by 
the several penal and correctional institutions of the 
States and political subdivisions thereof and the District 
of Columbia, and the actual and potential markets for 
products of such industrial operations and activities. 

"(b) To initiate, formulate, and recommend for approval of 
the President a program of projects with respect to 
replanning and reorganizing the existing prison industries 
systems and allied prison activities of the several State 
and political subdivisions thereof and the District of 
Columbia to the end that the industrial operations and 
activities of such institutions may be so reorganized as 
to relieve private industry and labor of any undue burden 
of competition between the products of private industry 
with the products of such institutions; and to eliminate 
idleness and to provide an adequate and humane system of 
rehabilitation for the inmates of such institutions. 



9742 



\ 

'\ -166- 

"(2) To recommend for the approval of the President loans or 
grants, or "both, to the several States and political subdivisions 
thereof and the District of Columbia necessary to accomplish the 
purposes of this Order, and to administer and supervise the 
program of projects approved by the President. 

"In the performance of such duties and functions the Prison 
Industries reorganization Board is hereby authorized to employ 
the services and U'eans mentioned in subdivision (a) of section 3 
of the said Emergency Relief Appropriation Act of 1935, to the 
extent therein provided, and, within the limitations prescribed 
by said section, to exercise the authority with respect to 
personnel conferred by subdivision (b) thereof. 

"The acquisition of articles, materials, and supplies for use in 
carrying out any project authorized by this Executive Order 
shall be subject to the provisions of Title III of the Treasury 
and Post Office Appropriation Act, fiscal year 1934 (47 Stat, 
1489, 1520). 

"For administrative expenses of the Prison Industries 
Reorganisation Administration there is hereby allocated to the 
Administration from the appropriation made by the Emergency 
Relief Appropriation Act of 1935 the sum of $100,000. Separate 
allocations will be made hereafter for each of the authorized 
activities as may be needed. 

FRANKLIN D. ROOSEVELT" 

TEE UHITE HOUSE, 

September 26, 1935. 



974-2 



-167- 

APFELIDIX K 

NPA Tuesday 1 

Legal Division December 4, 1934 

MEMOEAHDUM 

TO: Jack Garrett Scott, Associate Counsel 

FROM: Peter Seitz, Assistant Counsel 

SUBJECT: Prison Lai) or Con nect 

The discussion in this report relates to the three 
recommendations contained in the eiccent from the agend? of the 
Board, dated December 3, 1334, and marked respectively (c), (d) 
and (f). 

I . As to recommendation "(c)" . 

The Prison Labor Authority is not created by a 
code of fair competition. It owes its existence to 
the ^revisions of a Prison Labor Contact. With 
resnect I o the Pxuson L^bor Corrnact the following 
observations must be made. 

(A) C0HGH3SS HAS HOT CONSENTED TO THE COMPACT. 

Article I, Section 10, Clause 3 of the Con- 
stitution reads in "part as follows: 

"No State shall, without the consent of Congress, 
**** enter into any Agreement or Compact with 
another State, or, with a foreign Power ****." 

(S) IT IS DOUBTFUL WH3TH3S COHGEESS ,AY DELEGATE ITS 
POWEH TO SO C0HSE1TT. The Supreme Court has upheld 
delegations of power by C ong r 3 s s to the Executive 
to m±ke rules and regul •lions in furtherance of 
congressional legislation enacted under certain 
general powers given to Congress, such as those 
contained in the Commerce Clause. I know of no 
theory or precedent which would support. a delega- 
tion of authority to the President to consent to 
State Compacts. In holding delegation of legislative 
power valid, the Courts lean heavily upon the theory 
that the necessities of the case require that 
legislative details be filled in by administrative 
officers (J. W. Hampton & Co., vs. U. S. 276, U.S. 394). 
This reasoning would not obtain in ? situation where 
the simple consent of Congress is required. 



9742 



-168- 

(C) THE 1TIHA DOSS HOT COITTAIIT A DELEGATION OF POWERS 
TO GIVE CONGRESSIONAL CONSENT TO A STATU COMPACT. 
The President's Order approving the Prison Labor 
Compact refers to the National Recovery Act as 
authority for so doing. Assuming (without conceding) 
that a delegation of authority to assent to State 
Compacts may "be made to the President "by Congress, 
it has not "been made under the National Industrial 
Recovery Administration. Section 4-a of Title I of 
the NIRA provides that: 

"The President is authorized to ******* approve 
voluntary agreements "between and among, persons 
engaged in a trade or industry, la"bor organiza- 
tions, and trade or industrial organizations, 
associations, or groups relating to any trade 
or industry, *****». 

Let us assume further that the States engaged in 
Prison industries are persons or groups within 
that meaning of Section 4-a; but is the Compact 
an agreement within that Section? Section 7-a 
reads as follows: 

"Every code of Fair Competition, agreement and 
license approved, prescribed, or issued under this 
title shall contain the following conditions: (l) 
That employees shall have the right to organize 
and bargain collectively ******". etc. 

Obviously a compact relating to the regulation 
of Prison industries cannot contain the pro- 
visions set forth in Section 8-a, required in all 
agreements which may be approved under Title I of 
the Act. In my opinion this Section must be read 
in connection with and as a limitation upon Section 
4-a. In other words the agreements, which the 
President may approve under Section 4-a, are those 
which contain provisions set out in Section 7-2. The 
present compact contains no such provisions. The con- 
clusion must follow that the 1TIRA cannot be relied 
upon as a basis for the authority of the President 
(delegated by Congress) to approve the Compact. 

(D) THE PRISOH LABOR COMPACT LAY HOT IAVE BEEN PROPERLY 
EXECUTED AHD IS THEREFORE HOT BINDING UP01T ALL OF 
THE STATES SIGNATORY THERETO. In my opinion a State 
would not be bound to a compact signed by 



9742 



-169- 

State officers ■unless the Constitution of such 
State contained a clause authorizing such a sig- 
nature or there were sU^portin^, and ratifying 
State legislation. The Prison Labor Compact 
was, in most instances, signed by State Com- 
missioners of Prisons, Wardens and Chairmen 
of Prison Boards. In some instances the Governor 
signed for the State. In some cases the Governor 
approved the signature of the Warden of the Prison 
Board. In only one case (Kentucky) has there been 
State legislation ratifying the compact. 

There has been no survey made of the Laws of each 
signatory State, but until such a study is made, 
it should be borne in rind that the signatures 
to the compacts were probably made without the 
authority, and may not be binding upon the several 
States. 

Conslusion as to "I" . 

The Prison Labor Compact as a legal instrument is -unenforce- 
able in the Courts. It represents merely a declaration of vol- 
untary cooperation by the State prisons with the Federal Government's 
Recovery Program. This is not meant to mean that a valid compact 
could not be made covering the subject matter dealt with by the 
Prison Labor Compact. 

The Prison Labor Authority exists by virtue of Article VII 
of the Compact in the same manner as code authorities exist 
by virtue of the provisions of codes of fair competition which 
deal with administrative machinery. If, as is argued herein, 
the Compact has no legal validity, the Prison Labor Authority, 
likewise, has no legal basis for existence. Its only powers 
are those contained in Article VII of the Compact. 

II . As to recommendation .(d/. 

The recommendation has two aspects: Legal and Economic. 

(A) The Legal Aspect. 

The Kational Industrial Recovery Board cannot "require 
an agreement" between the Prison Labor Authority and the 
respective free industry code authorities. Tne National 
Industrial Recovery Board only has those powers delegated 
to it by Executive Orders of the President under the 
National Industrial Recover:' Act or otherwise whore such 
power exists in the President. It has already been 
indicated that the NIRA. is inapplicable to the Prison Labor 



9742 



-170- 

situation. I do not know of any provisions in 
the Constitution or any other statutory authority 
vesting the President with the -ower to legislate 
concerning the manner in which sovereign states 
may conduct their orison industries. 

The Prison Labor Authority, moreover, has no 
■)ov»er to change the connect., Article V and Article 
VII, section 1 (d) of the Compact set forth the 
price practices and terms which shall constitute 
the fair competitive standards required of ~>risons. 
Any departure from these provisions would require an 
amendment to the Compact which, of necessity, would 
require the consent of each individual signatory State 
thereto. 

Assuming that this can be and will he done, the -iroblem 
of enforcement will still be unanswered. If a State 
refuses to enter into an agreement such as recommended 
by the Committee concerning a change of price, or if 
it violates the provisions of the Compact in any other 
particular, the only legal recourse would be a suit in 
the Supreme Court by another State for breach of the 
Compact. It is unlikely that such a suit would ever 
be maintained inasmuch as the States, in the operation 
of their prison industries, are very closely bound 
together in mutual self-interest against the free in- 
dustry groups which they believe are hostile to them. 
A suit could not be maintained by any individual or free 
industry Code Authority against the State because of the 
provisions of the eleventh Amendment to the Constitution. . 
It is respectfully submitted that in the absence of 
adequate enforcement machinery no purpose would be served 
^oy agreements such as recommended by the Committee. 

(B) The Economic Aspect. 

It has been represented to me iy representatives of the 
Prison Labor Authority and others that the motivating 
purpose behind the actions of the several states in sign- 
ing the compact was the use of the NBA label. The use 
of such label was considered to legitimatize an industry 
which has been subject to social boycott and industrial 
attack over a "-eriod of .years, and became necessary be- 
cause of the boycott provisions of Article IX, Section 3 
of the Retail Trade Code. The recommendations of the 
Committee include a recommendation that the label be denied 
prison industries or be modified so as to indicate that 
the product was manufactured in a prison. The latter al- 
ternative of modification is unacceptable to the prisons 
because it enables free industries to carry on what they 



9742 



Ill 



IV. 



=171- 

deem to be an unjustified boycott against its products. The 
removal of the label, in my opinion, would eliminate any 
reason for the prison industries restricting themselves further 
by the irovisions of the unenforceable compact. The quid ;;ro quo 
will have 'oeen removed. Bather than limit tnemselves to prices 
established by such agreements as the Committee suggest, it is 
my guess that they will utilise their large capital investment 
in machinery to produce, sell and distribute at their will and 
pleasure, free of the restrictions of standards of fair competi- 
tion thereby creating an enforcement and compliance -problem 
which may be beyond the power of the Administration to control. 

As to recommendation "(?)" . 

The Prison Labor Authority has informed Division 8 that 
numerous prisons desire to avail themselves of the 'benefits 
of the Prison Labor Com act (The use of labels) and to subject 
themselves to the restrictions thereof, but are unable to do so 
because of one of the following reasons: (a) The State in which 
the orison is located has not signed the compect because of some 
legal obstacle; or (b) the State in which the prison is located 
has signed the compact but such nrisons are not subject to the 
control or under the supervision of the State. 

It is desired to extend the benefits of the compact only 
where the prison concerned competed upon a fair basis with free 
industries, and u on the terms set forth in the compact. Indivi- 
duals- cannot sign the com ct, but they can sign pledges agreeing 
to conform to the competitive standards established in the compact 
in the same manner as sheltered workshops nay sign pledges 
agreeing to conform with blie provisions of the code covering the 
industry in which they are e c and thereby entitle themselves 
to labels. 

A proposed Administrative Order was returned oy the Review 
Division with the comment that an 3xecutive Order would be more 
appropriate. It was deemed wisest to defer further action upon 
the application until the decisions of the Board unon the general 
subject of Prison Labor and the retention of the Prison Connact 
was announced. If the Prison Labor Compact is continued in its 
>resent form, the proposed Order, in my opinion, should be ^re- 
pared, submitted ?n£ signed. 

General Conclusions . 

I trust that I am not too presmmtious in advancing these 
conclusions, without which I o not feel this re- ort is complete. 



9742 



•172- 



A. The compact is unenforceable legelly, but it is most 
desirable that it be retained u)on a voluntary basis 
because it is the only means of inducing prison in- 
dustries to compete with free industries upon a fair 
basis. The only consideration which will induce the 
prison industries to compete upon such a basis is per- 
mission "oy the Administration to use the 1TBA, label. 

If this permission is denied the States will not allow 
their manufacturing plants to remain idle but will employ 
them upon a competitive basis with free industries, 
thereby aggravating and augmenting compliance problems, 
especially in the Retail Trade. 

B. As far as I can determine the only com- laints made 
against the compact to date were on the ground of in- 
effective administration. If this be so, it would 

be wise to retain the compact and make its adminis- 
trative and enforcement machinery more effective. The 
alternative, which is scrapning the Compact, me?ns 
uncontrolled competition. 



Peter Seit^ 
Assistant Counsel 



9742 





-1 73- 

SUPPLEMENT TO APPENDIX K 

NRA December 7, 1934 

Legal Division 

■'•MEMORANDUM 

TO: Jack Garrett Scott, Associate Counsel 

FROM: Peter Seitz, Assistant Counsel 

SUBJECT: Prison Labor 

I believe the following observations should be made 
to supplement my memorandum to you dated December 4, 1934* 

I. My previous memorandum dealt solely with the existing 
situation in the prison industry field as controlled by 

(a) the Prison Labor Compact' 

(b) the Hawes-Cooper Act (Copy of the A c t ex- 
tracted from the United States Code Annotated 
is annexed) 

II. In determining the final solution of the prison-free 
industry competition problem, we should consider the possibility of 
Federal control- of the sale of prison ^ade goods through new Federal 
legislation. 

A. Under the Hawes-Cooper Act divesting -orison made 
goods of thp.ir interstate character no administrative 
control of the situation is possible without new 
legislation because 

(1) The NIFA is general in application; the 
Hawes-Cooper Act is specific in its treatment of 
prison made goods. Hence rules of statutory con- 
struction would favor th'fi Hawes- Cooper Act as 
paramount in the field. 

(2) The Hawes-Cooper A c t has the effect of nullify- 
ing the Commerce Clause of the Constitution insofar as 
prison made goods are concerned. It constitutes a 
revesting of jurisdiction over this subject in the 
States. If there is no interstate commerce in prison 
mada^ goods, there is no basis for the exercise of 
Federal jurisdiction. I know of no other clause in 



9742 



-174- 

the Constitution upon which Federal power can be 
predicted. The recommendations of the Ulman Com- 
mittee must he considered with this in mind. 

B. New legislation having the effect of cancelling the 
Hawes-Cooper Act and of revesting the Federal Government 
with jurisdiction over interstate commerce in prison made 
goods may form a "basis for the solution of the problem 
along the following lines. 

(l) The activity of States in selling prison made goods 
in interstate markets in competition with free manufacturers 
in other States, for profit, may. be considered to be a pro- 
prietary function of the State as distinguished from a gov- 
ernmental function, TThere a State engages in a proprietary 
function her armor of sovereignty is no protection to the 
exercise of federal power. See Ohio vs. Helverinp: (1934) 
54 Sup. Ct. 725 , as to Federal exercise of the tax power 
\7hen a State through its agency goes into the business of 
selling liquor. The Court said 

"If a State chooses to go into a business of 
buying and selling commodities its right to 
do so may be conceded so far as the Federal 
. Constitution is concerned; but the exercise 
of the right is not the performance of a 
governmental function,***. IThen a State 
enters the market place seeking customers, 
it divests itself of its quasi sovereignty pro 
tanto, and takes on the character of a trader, 
so far at least as the taxing power of the 
Federal Government is concerned." 

lBhat Is true of the Taxing Power must be true of the 
Commerce Power, and the Federal Government should be able 
to s"cipervise interstate commerce in prison made goods if 
the Hawes-Cooper Act is repealed. 

C. The political possibility of obtaining legislation to 
supplant the Hawes-Cooper Act is doubtful in my opinion 
and should be carefully explored. 



Peter Seitz 
Assistant Counsel 



9742 



-175- 

APPENDIX L 

Information Re:- Stumers - Ashurst Act with States 

The following points have "been raised by various prison officials 
and others in re the new Federal Act relative to prison industries, 
and the conclusions set forth appear to "be in line with the general 
concensus of opinion relative to the Act. 

(l) The shipper rill he liable under the Act if he ships 
any prison -oroducts into any of the following 23 states except 
as indicated: 



Arizona 

Except farm products 
California 

Except jute and hemp hags 
Colorado 
I dali o 
Illinois 

Except agricultural limestone 
Kansas 

Except tags or markers, trine, 

farm products 
liaine 

lias s ach us e 1 1 s 
Michigan 

Except hinder trine, rope and 

cordage. Effective Nov. 22, 1935. 
Hon tana 

Except certain repair parts for 

farm machinery. 



Nebraska 

Except farm supplies, machin- 
ery and equipment. Effec- 
tive September 1, 1935. 

New Hampshire 

New Jersey 

New York 

North Carolina 

Except farm products, coal 
and chert. 

Ohio 

Oregon 

Except flax 

Pennsylvania 

Rhode Island 

Texas 

Utah 

Virginia 

Washington 



When shi-oping any of the exceptions noted under (l) into another 
state, the shipner must be governed by the provisions set forth in (2). 

■ (2) The shipper rill be liable rhen shipping prison products 
into the following states unless he marks the package containing 
prison products with name and address of (a) shipper; (b) con- 
signee; (c) prison where made; and (d) nature of contents. 



Alabama 

Alaska 

Arkansas 

Connecticut 

Delaware 

District 

Florida 

Georgia 

Hawaii 

Indiana 



of 



Iowa 

Kentucky 
Louisiana 
Maryland 
Minnesota 
Columbia Mississippi 
Missouri 
Nevada 
New Mexico 
Oklahoma 
North Dakota 



Philippine Islands 
Porto Pico 
South Carolina 
South Dakota 
Tennessee 
Vermont 

Virgin Islands 
West Virginia 
Wisconsin 
Wyoming 



9742 



-176- 

(3) The shipper will be liable unless he also labels each 
article of prison products as required when making shipments 
into the following states: 

California Iowa South Dakota 

Indiana. Kentucky Wisconsin 

Georgia New Mexico Minnesota 

OPEN MARKET SALE OF PR I SOI! PRODUCTS PROHIBITED 

The following states prohibit the sale of prison-made products 
within their borders except as indicated. 

ARIZONA NEBRASKA 

Except farm products Except farm supplies, nachin- 

CALIEORNIA ery and equipment. Effective 

Except jute, and henra bags September 1, 1935. 

COLORADO NEW HAMPSHIRE 

IDAHO *NEW JERSEY 
ILLI170IS . NEW YORK 

Except agricultural limestone NORTH CAROLINA 
KANSAS Except farm products, coal 

Except tags or markers, twine and chert 

farm products 

"MAINE OHIO 

MASSACHUSETTS OREGON 
MICHIGAN Except flax 

Except binder twine, rope and PENNSYLVANIA 

cordage. Effective Nov. 22, 1935. RHODE ISLAND " 

MONTANA TEXAS 

Except certain repair parts for UTAH 

farm machinery. * VIRGINIA 

WASHINGTON 

* New Jersey, Virginia and Maine prohibit the sale of prison prod- 
ucts of other states on the open market but permit the sale of prison 
products made in their own states within their own borders. It is a 
question whether such laws are constitutional and hence enforceable. A 
recent Wisconsin court decision appears to support this view (See Wis. v. 
Whitfield 257 N.W. 601). 

In Georgia and the District of Columbia the manufacture of prison 
products is confined to state-use, but there are no laws restricting 
the sale of prison products on the open market in either. The same is 
true in Nevada and New Mexico where very small amounts of prison prod- 
ucts, if any, are made for sale on the open market. 



9742 



■177- 



LAjELS bzxssbed on p: l isoi t products 



California, and Kentucky have laws which require labels, etc. on 
prison products from other states, but as these laws do not appl3 r to 
prison products made in California and Kentucky, they are probably 
unconstitutional and unenforceable. 

Indiana, Iowa, New Jersey, New Mexico, South Dakota, Georgia, 
Minnesota and Wisconsin require prison products to be labeled 
"Convict-Made". Iowa, Minnesota and New Jersey require the year and 
name of prison and Wisconsin the name of prison only to be added. 
Indiana requires a license fee of $500 and a bond of $5000 from vendors 
of prison products. 



9742 



-178- 



APPEITDIX M 



u.-s. depart: s't oe labor 

Bureau of Labor Statistics 
Washington 



December 5, 1935 



i.Ir, Clark, 

national Recovery Administration, 
Room 4023, Commerce Building 
Washington, D. C. 

Dear Mr. Clark: 



In accordance with your telephonic request, I an 
listing below the States which, have, up to December 4th, 
accepted provisions of the Hawes-Cooper Act. 



Arizona 

Arkansas 

California 

Colorado 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Maine 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Montana 



Nebraska 

New Hampshire 

New Jersey 

New York 

North Carolina 

Ohio 

Oregon 

Pennsylvania 

Rhode Island 

South Dakota 

Texas 

Utah 

Virginia 

Washington 



Very truly yours, 



(S) 



Herman B. Byer 



Herman 3, Byer, Chief, 
Division of Construction & Public Employment 



9742 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 
THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of Review of the 
National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble, analyze, and report upon the statistical 
information and records of experience of the operations of the various trades and 
industries heretofore subject to codes of fair competition, shall study the ef- 
fects of such codes upon trade, industrial and labor conditions in general, and 
other related matters, shall make available for the protection and promotion of 
the public interest an adequate review of the effects of the Administration of 
Title I of the National Industrial Recovery Act, and the principles and policies 
put into effect thereunder, and shall otherwise aid the President in carrying out 
his functions under the said Title. I hereby appoint Leon C. Marshall, Director of 
the Division of Review. 

The study sections set up in the Division of Review covered these areas: industry 
studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 
legal studies, administration studies, miscellaneous studies, and the writing of code his- 
tories. The materials which were produced by these sections are indicated below. 

Except for the Code Histories, all items mentioned below are scheduled to be in mimeo- 
graphed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 
codes. They contain the definition of the industry and the principal products thereof; the 
classes of members in the industry; the history of code formation including an account of the 
sponsoring organizations, the conferences, negotiations and hearings which were held, and 
the activities in connection with obtaining approval of the code; the history of the ad- 
ministration of the code, covering the organization and operation of the code authority. 
the difficulties encountered in administration, the extent of compliance or non-compliance, 
and the general success or lack of success of the code; and an analysis of the operation of 
code provisions dealing with wages, hours, trade practices, and other provisions. These 
and other matters are canvassed not only in terms of the materials to be found in the files, 
out also in terms of the experiences of the deputies and others concerned with code formation 
and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 
mimeographed. They are to be turned over to the Department of Commerce in typewritten form. 
All told, approximately eight hundred and fifty (850) histories will be completed. This 
number includes all of the approved codes and some of the unapproved codes. (In Work 
Mat erial s No 18, Content s of Code Histries , will be found the outline which governed 
the preparation of Code Histories.) 

(In the case of all approved codes and also in the case of some codes not carried to 
final approval, there are in NRA files further materials on industries. Particularly worthy 
of mention are the Volumes I, II and III which constitute the material officially submitted 
to the President in support of the recommendation for approval of each code. These volumes 
9768—1. 



-ii- 

set forth the origination of the code, the sponsoring group, the evidence advanced to sup- 
port the proposal, the report of the Division of Research and Planning on the industry, the 
recommendations of the various Advisory Boards, certain types of official correspondence, 
the transcript of the formal hearing, and other pertinent matter. There is also much offi- 
cial information relating to amendments, interpretations, exemptions, and other rulings. The 
materials mentioned in this paragraph were of course not a part of the work of the Division 
of Review. ) 

THE WORK MATERIALS SERIES 

In the work of the Division of Review a considerable number of studies and compilations 
of data (other than those noted below in the Evidence Studies Series and the Statistical 
Material Series) have been made. These are listed below, grouped according to the char- 
acter of the material. (In Work M aterials No . 17, Tentative O utlines and S ummaries of 
Studies in Process , these materials are fully described). 

I ndustry Studies 

Automobile Industry, An Economic Survey of 

Bituminous Coal Industry under Free Competition and Code Regulation, Economic Survey of 

Electrical Manufacturing Industry, The 

Fertilizer Industry, The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 through 

1934. 
Part B - Section 3 (e) of NIRA and its administration. 
Part C - Imports and Importing under NRA Codes. 
Part D - Exports and Exporting under NRA Codes. 

Forest Products Industries, Foreign Trade Study of the 

Iron and Steel Industry, The 

Knitting Industries, The 

Leather and Shoe Industries, The 

number and Timber Products Industry, Economic Problems of the 

Men's Clothing Industry, The 

Millinery Industry, The 

Motion Picture Industry, The 

Migration of Industry, The: The Shift of Twenty-Five Needle Trades From New York State, 
1926 to 1934 

National Labor Income by Months, 1929-35 

Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agriculture and Railway Trans- 
portation, January 1923, to date 

Retail Trades Study, The 

Rubber Industry Study, The 

Textile Industry in the United Kingdom, France, Germany, Italy, and Japan 

Textile Yarns and Fabrics 

Tobacco Industry, The 

Wholesale Trades Study, The 

Women's Neckwear and Scerf Industry, Financial and Labor Data on 

9768—2 



Women's Apparel Industry, Some Aspects of the 

T rade Practic e St udies 

Commodities, Information Concerning: A Study of NRA and Related Experiences in Control 
Distribution, Manufacturers' Control of: Trade Practice Provisions in Selected NRA Codes 
Distributive Relations in the Asbestos Industry 
Design Piracy: The Problem and Its Treatment Under NRA Codes 
Electrical Mfg. Industry: Price Filing Study 
Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition, Control of 
Minimum Price Regulation Under Codes of Fair Competition 
Multiple Basing Point System in the Lime Industry: Operation of the 
Price Control in the Coffee Industry 
Price Filing Under NRA Codes 
Production Control in the Ice Industry 
Production Control, Case Studies in 

Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 
Trade Practice Rules of The Federal Trade Commission (1914-1936): A classification for 
comparison with Trade Practice Provisions of NRA Codes. 

Labor Studies 

Cap and Cloth Hat Industry, Commission Report on Wage Differentials in 
Earnings in Selected Manufacturing Industries, by States, 1933-35 
Employment, Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-35 
Fur Manufacturing, Commission Report on Wages and Hours in 
Hours and Wages in American Industry 
Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Part D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 
Materials in the Field of Industrial Relations 
PRA Census of Employment, June, October, 1933 
Puerto Rico Needlework, Homeworkers Survey 

Administrative Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Con- 
ditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approve Codes in Industry Groups, Classification of 

Basic Code, the — (Administrative Order X-61) 

Code Authorities and Their Part in the Administration of the NIRA 
Part A. Introduction 
Part B. Nature, Composition and Organization of Code Authorities 

9768—2. 



Part C. Activities of the Code Authorities 

Part D. Code Authority Finances 

Part E. Summary and Evaluation 
Code Compliance Activities of the NRA 
Code Making Program of the NRA in the Territories, The 
Code Provisions and Related Subjects, Policy Statements Concerning 
Content of NIRA Administrative Legislation 

Part A. Executive and Administrative Orders 

Part B. Labor Provisions in the Codes 

Part C. Trade Practice Provisions in the Codes 

Part D. Administrative Provisions in the Codes 

Part E. Agreements under Sections 4(a) and 7(b) 

Part F. A Type Case: The Cotton Textile Code 
Labels Under NRA, A Study of 

Model Code and Model Provisions for Codes, Development of 

National Recovery Administration, The: A Review of its Organization and Activities 
NRA Insignia 

President's Reemployment Agreement, The 

President's Reemployment Agreement, Substitutions in Connection with the 
Prison Labor Problem under NRA and the Prison Compact, The 
Problems of Administration in the Overlapping of Code Definitions of Industries and Trades, 

Multiple Code Coverage, Classifying Individual Members of Industries and Trades 
Relationship of NRA to Government Contracts and Contracts Involving the Use of Gcvernmeal 

Funds 
Relationship of NRA with States and Municipalities 
Sheltered Workshops Under NRA 
Uncodified Industries: A Study of Factors Limiting the Code Making Frogram 

Legal Stud ies 

Anti-Trust Laws and Unfair Competition 

Collective Bargaining Agreements, the Right of Individual Employees to Enforce 

Commerce Clause, Federal Regulation of the Employer-Employee Relationship Under the 

Delegation of Power, Certain Phases of the Principle of, with Reference to Federal Industrial 
Regulatory Legislation 

Enforcement, Extra-Judicial Methods of 

Federal Regulation through the Joint Employment of the Power of Taxation and the Spending 
Power 

Government Contract Provisions as a Means ;f Establishing Proper Economic Standards, Legal 
Memorandum on Possibility of 

Industrial Relations in Australia, Regulation of 

Intrastate Activities Which so Affect Interstate Commerce as to Bring them Under the Com- 
merce Clause, Cases on 

Legislative Possibilities of the State Constitutions 

Post Office and Post Road Power — Can it be Used as a Means of Federal Industrial Regula- 
tion? 

State Recovery Legislation in Aid of Federal Recovery Legislation History and Analysis 

Tariff Rates to Secure Proper Standards of Wages and Hours, the Possibility cf Variation in 

Trade Practices and the Anti-Trust Laws 

Treaty Making Power of the United States 

War Power, Can it be Used as a Means of Federal Regulation of Child Labor? 
9768—4. 



THE EVIDENCE STU DIES SERIES 

The Evidence Studies were originally undertaken to gather material for pending court 
cases. After the Schechter decision the project was continued in order to assemble data for 
use in connection with the studies of the Division of Review. The data are particularly 
concerned with the nature, size and operations of the industry; and with the relation of the 
industry to interstate commerce. The industries covered by the Evidence Studies account for 
more than one-half of the total number of workers under codes. The list of those studies 
follows: 



Automobile Manufacturing Industry 
Automotive Parts and Equipment Industry 
Baking Industry 

Boot and Shoe Manufacturing Industry 
Bottled Soft Drink Industry 
Builders' Supplies Industry 
Canning Industry 
Chemical Manufacturing Industry 
Cigar Manufacturing Industry 
Coat and Suit Industry 
Construction Industry 
Cotton Garment Industry 
Dress Manufacturing Industry 
Electrical Contracting Industry 
Electrical Manufacturing Industry 
Fabricated Metal Products Mfg. and Metal Fin- 
ishing and Metal Coating Industry 
Fishery Industry 

Furniture Manufacturing Industry 
General Contractors Industry 
Graphic Arts Industry 
Gray Iron Foundry Industry 
Hosiery Industry 

Infant's and Children's Wear Industry 
Iron and Steel Industry 



Leather Industry 

Lumber and Timber Products Industry 
Mason Contractors Industry 
Men's Clothing Industry 
Motion Picture Industry 
Motor Vehicle Retailing Trade 
Needlework Industry of Puerto Rico 
Painting and Paperhanging Industry 
Photo Engraving Industry 
Plumbing Contracting Industry 
Retail Lumber Industry 
Retail Trade Industry 
Retail Tire and Battery Trade Industry 
Rubber Manufacturing Industry 
Rubber Tire Manufacturing Industry 
Shipbuilding Industry 
Silk Textile Industry 
Structural Clay Products Industry 
Throwing Industry 
Trucking Industry 
Waste Materials Industry 
Wholesale and Retail Food Industry 
Wholesale Fresh Fruit and Vegetable Indus- 
try 
Wool Textile Industry 



THE STATISTICAL MATERIALS SERIES 



This series is supplementary to the Evidence Studies Series. The reports include data 
on establishments, firms, employment. Payrolls, wages, hours, production capacities, ship- 
ments, sales, consumption, stocks, prices, material costs, failures, exports and imports. 
They also include notes on the principal qualifications that should be observed in using the 
data, the technical methods employed, and the applicability of the material to the study of 
the industries concerned. The following numbers appear in the series: 
9768—5. 



- vi - 

Asphalt Shingle and Roofing Industry Fertilizer Industry 

Business Furniture Funeral Supply Industry 

Candy Manufacturing Industry Glass Container Industry 

Carpet and Rug Industry Ice Manufacturing Industry 

Cement Industry Knitted Outerwear Industry 

Cleaning and Dyeing Trade Paint, Varnish, and Lacquer, Mfg. Industry 

Coffee Industry Plumbing Fixtures Industry 

Copper and Brass Mill Products Industry Rayon and Synthetic Yarn Producing Industry 

Cotton Textile Industry Salt Producing Industry 

Electrical Manufacturing Industry 

THE COVERAGE 

The original, and approved, plan of the Division of Review contemplated resources suf- 
ficient (a) to prepare some 1200 histories of codes and NRA units or agencies, (b) to con- 
solidate and index the NRA files containing some 40,000,000 pieces, (c) to engage in ex- 
tensive field work, (d) to secure much aid from established statistical agencies of govern- 
ment, (e) to assemble a considerable number of experts in various fields, (f) to conduct 
approximately 25% more studies than are listed above, and (g) to prepare a comprehensive 
summary report. 

Because of reductions made in personnel and in use of outside experts, limitation of 
access to field work and research agencies, and lack of jurisdiction over files, the pro- 
jected plan was necessarily curtailed. The most serious curtailments were the omission of 
the comprehensive summary report; the dropping of certain studies and the reduction in the 
coverage of other studies; and the abandonment of the consolidation and indexing of the 
files. Fortunately, there is reason to hope that the files may yet be cared for under other 
auspices. 

Notwithstanding these limitations, if the files are ultimately consolidated and in- 
dexed the exploration of the NRA materials will have been sufficient to make them accessible 
and highly useful. They constitute the largest and richest single body of information 
concerning the problems and operations of industry ever assembled in any nation. 

L. C. Marshall, 
Director, Division of Review. 
9768—6. 



I