Policy Exchange, a leading Conservative thinktank, has recommended placing prisoners in 40-hour-a-week employment, to pay for their board and also to save for their release.
The group's report, Inside Job, states that currently prisoners rarely work, and if they do it is for an average of 12 hours per week.
The report suggests prisoners should earn a minimum wage, which is lower than the national minimum wage, and that a portion of their earnings should be paid into a victim's fund.
Policy Exchange polled the general public about placing prisoners in private employment and found that 71% of people backed the idea of prison work schemes. Many people felt that prisoners should make a contribution towards the cost of keeping them in jail.
But at the moment, while there are 300 prison workshops in England and Wales, they are only operating at 50% capacity.
Blair Gibbs of Policy Exchange said: "People expect prisoners to work in jail but, under the current system, no inmate is compelled to work and most do not choose to, meaning they leave prison totally unprepared for working life.
"Creating a market for real work in prison where inmates are encouraged to replicate a full working week should reduce unemployment rates on release and cut reoffending rates. Real prison work is a long overdue justice reform that the public support."
One example of a successful prison work scheme currently in operation is DHL's pick-and-pack workshop in HMP Wayland, in Norfolk. The courier company employs prisoners for a 30-hour work week, for which they are paid £30.
But this example is a rare one. Despite the number of prisoners increasing over the years, the percentage of those on work schemes has dropped from 17% to 11% since 1995.
There are no private companies employing prisoners in England and Wales. Policy Exchange hopes that by setting up successful prison work schemes, they will then be able to "showcase the work of businesses who do engage in prison work so that new entrants are not put off by fears of negative publicity".
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