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Many Americans may assume that the country's convict-labor system is a thing of the past, especially given unflattering Western media coverage of other countries' reliance on prison labor to produce export goods. But in 2005 -- the most recent year for which a fairly complete set of countrywide data is available -- America's convict-labor system employed nearly 1.4 million inmates, of which about 600,000 worked in manufacturing. As a result, convict labor is not only exploitative; it also distorts market competition.While convict labor came to be used to some extent in almost all industries, it was concentrated in only a few.When the China shock came, its overall impact may have been compounded by its effect on convict labor. From 2000 to 2005, the number of convicts employed in manufacturing increased by 92 percent, as some firms embraced cheap prison labor in an effort to remain competitive, while others in their industry lowered their wage bills by moving their operations abroad. Overall, convict labor is responsible for 5 percent of the total manufacturing-employment decline in the U.S. from 2000 to 2007 .
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