When income disparity exists on the level that it currently does - violent revolutions occur. Our overlords today know that if they lock up a sizable portion of the healthy men and women, then it weakens family structure to the point that individuals are more easily moulded to fit the state's design of sheep - bot/slave.
Also, it helps to tip the scales of fear in a populace - the notion that your door could be kicked in at any moment, even if it's an "Uh Oh! Sorry bout your dead father - we were at the wrong address! Toodles!"
Factor in just a dash of private prison profits for the boys on the share holders committee, and you've got a societal carcinogenic dish sure to make your guests "ooh," and "ah!"
Hell, how are we supposed to compete with the Chinese in the realm of trinkets of absolutely negligible value without prison slave Labor?
Try to put yourself in someone like David Rockefeller's shoes for once - What would emperor Palpentine say were you to report that the minions were all enjoying prosperity and freedom, and all that stuff that you are supposed to promote but secretly smoke like 40 foot Babylonian Deities?