The objectives of this study are to analyze the productivity of prison labor and to derive some implications through comparisons with productivities of small and medium sized enterprise in free market economy in order to improve the quality of prison labor. Fundamentally, the aim of prison labor is the rehabilitation of prisoners, while that of private enterprise is maximizing the profits. Thus, there lie some limitations in comparing the productivity of these two. Goods and services produced by prisoners are in market competing with those by private sectors.However, according to this study, the productivity and the capital investment efficiency of prison labor are very low comparing to the private sectors. Therefore, in order for the prison labor to have a competitive edge, more effort will be required to improve its technology and productivity. Further study will also be needed to devise various programs for improvement of prison labor.