At a minimum, the businesses should be paying the state the prevailing wage for the jobs being done (the business owner should not be a beneficiary of below market labor).
Even better if the prisoners keep a substantial portion of that.
Even better if the prisoners keep a substantial portion of that.
I don't know anything in particular about the program, but why do you think the business should pay the prevailing wage? How many prisoners would get hired with that requirement vs. without it? As a business owner why would I prefer to hire a prisoner instead of someone not in prison? Or am I thinking about it the wrong way? It sounds like hiring a prisoner benefits the prison system and the prisoner (and also the business as long as there is an incentive of some kind).
You make a fair point of incentives to hire prisoners rather than others though.
I think a better standard is that the labor should be competitively bid for with multiple buyers at any given time so there's actual competition for it. The prevailing wage would be lower than for free(..dom) labor, but not the pittance they're currently stuck with.
[1] yes, which to some, is a feature not a bug
Inside the prison system I'd be fine with making them do the accounting based on prevailing wages even if the money is going in a circle.