Study data were obtained for 1970-76. The variables of penal policy and practice were monetary allocations for segregative control, parole releases, and imprisonment rates. The central independent variable was States' changing labor force participation rates. Potential sources of variation in prison variables were controlled, including welfare benefit levels, criminal justice expenditures in other than custodial control categories, and geographic region. Results show that in the 1970's, custodial social control expenditure changes have conformed to labor force pressures, as labor force participation rates vary State by State. Where the fraction of the population which is economically active has declined, contributing to a surplus population, per capita expenditures for corrections have increased. To some degree, welfare benefit levels parallel corrections expenditure increases, linking 'coercive' and 'persuasive' social control efforts into a single theoretical model. The incidence of paroles was also found to be influenced by labor force participation increases; parole rates increased with an increased demand for low-wage labor. Both the welfare and the prison systems function to expel workers into the market as demands for labor increase and reabsorb them when the demand decreases. States' correction expenditures and conditional release policies do not translate into prison population increases or decreases, demonstrating that prison rates are out of control and are resistant to State managers' rationalization efforts. The lack of fit between inmate populations, budgets, and parole programs may indicate the capitalist state's inability to meet its custodial social control needs either because of fiscal constraints or political resistance. Tabular data and 34 references are provided.