Prisoners who took jobs outside jail have lost their High Court claim that a levy on their wages which goes to victim support is too high.
A judge in London rejected "on all grounds" their challenge to the legality of the way Justice Secretary Ken Clarke is operating rules governing deductions from pay packets.
The test case action affects inmates working in the community as they prepare for their release and to "go straight".
Welcoming the judgment, the "delighted" Justice Secretary said: "For too long offenders have not done enough to shoulder the financial burden of their crimes, leaving the taxpayer to foot the bill for the damage they have caused."
Mr Clarke added: "The Prisoners' Earnings Act is the start of Government getting the balance right - forcing prisoners to take responsibility for their crimes and helping victims to recover through the funding of these vital support services.
"In the first six months, nearly £400,000 has been raised through the Prisoners' Earnings Act for Victim Support.
"I'm delighted that this ruling means that offenders will continue to contribute to make amends for their crimes."
Under the Prisoners' Earnings Act 1996, inmates engaged in "enhanced wages work" outside prison have 40% of pay which is in excess of £20 paid to victim support.
Lawyers representing two inmates, S and KF, who cannot be named for legal reasons, argued the payments were "disproportionate" and said there was "widespread concern" about the levy.
The court heard claims that prisoners with high travel expenses to reach work were being left with no wages.
There were also complaints that they were being left with insufficient funds to pay towards costs of resettlement such as helping out with family expenses, or saving for a rent deposit and furniture for when they were released.
Mr Justice Sales was told at a two-day hearing in May the pressure group "Unlock" (the National Association of Reformed Offenders) was complaining that the levy undermined rehabilitation and acted as "a disincentive to work".
Kate Markus, appearing for S, a 40-year-old serving an indeterminate sentence in an open prison, argued Mr Clarke could, and should, have allocated a portion of the 40% levy to help the inmates rebuild their lives as well as help victims.
S has had a full-time job with a private employer doing manual work outside the prison since June last year.
Ms Markus asked the High Court to declare that Prison Service instructions issued by Mr Clarke - the first took effect in August last year - giving effect to the levy were "incompatible" with the European Convention on Human Rights.
She said Mr Clarke had failed to strike a balance between the interests of victims of crime and inmates.
The second claimant, KF, described by the judge as having an unspecified number of children, attends college while serving a four-year sentence at an open prison and is due for release next month.
Her QC, Hugh Southey, said she had decided not to seek work outside prison because of the impact of the levy on her potential earnings.
He argued the levy unlawfully imposed a heavier penalty than the one applicable at the time KF committed her offence and violated her rights under human rights legislation.
He also argued it breached the Equality Act as the levy was having a disproportionate impact on women.
After examining each of the arguments in turn, the judge announced he was dismissing the challenges to the relevant prison instructions on all grounds.
The question of an appeal to the Court of Appeal will be considered at a hearing later this month.
The case mostly affects the inmates of open prisons but also some Category C prisoners allowed to work in the community on day release under contracts of employment.
Rates of pay from outside employers are higher than those for work performed in prison.