The only country that did similar things was USSR.
The USSR by all accounts decreasingly relied on prison labor after WW2 and Stalinism ended. By the 60s, forced labor was anecdotic, and the conditions of people in the gulag system (which shifted from forced labor during Stalinism to mostly reeducation afterwards) were better than those in normal prisons to the point of prison being a punishment to rebellious gulag workers.
The USSR by all accounts decreasingly relied on prison labor after WW2 and Stalinism ended. By the 60s, forced labor was anecdotic, and the conditions of people in the gulag system (which shifted from forced labor during Stalinism to mostly reeducation afterwards) were better than those in normal prisons to the point of prison being a punishment to rebellious gulag workers.