Terrible. Round them up (oh wait) and eliminate their pay all together. It's prison, not a job. They are not employees!
I imagine a lot of these prisoners know they could very well be going to the hole for this.
It'll still shut down prison industry, which I imagine is their goal.
Yes, but there's only so many slots they have in administrative segregation, so if everyone striked, then it would be tougher for the guards to handle. They could always lock down entire units, but those only last for so long, and if companies decide they no longer want to hassle with prison labor, then their plans might work in the long-run.