Contract labor by incarcerated offenders was rationalized as a method for recovering prison costs and as a rehabilitation technique; however, the actual purposes of using convicts for industrial labor were the development of work force discipline among inmates (whose idleness was considered a form of deviance) and the generation of profits. The practice was discontinued for several reasons. First, contractor corruption made the use of contracted labor unprofitable for the state. Second, contractor influence over individual institution operations conflicted with state efforts to centralize authority in the penal system. Third, prison officials were unable to organize their work forces along industrial lines sufficiently to meet unable to take control of prison administration to the degree necessary to introduce sufficient efficiency. Finally, business leaders supported the termination of contract operations as a way to mollify free labor during a time of increasing militancy. Free laborers traditionally perceived prison labor as a threat; however, this group was ineffective in eliminating the contract system. Working class leaders would have been more successful had they attempted to organize prisoners into unions to pressure for improvements in prison pay and working conditions. Notes are included.