Introduction

With regard to employment policy and welfare reform, there is a large degree of consensus among policymakers and scholars that taxes and benefits must not lead to a situation in which poor individuals (or their families) face very high marginal tax rates when they take up a job or when their hours of work increase. Benefit systems that are too selective are beset by inactivity traps: they discourage the labour market participation of low-skilled workers.

In academic research, various proposals, related to basic income or negative income taxation, are put forward to remedy such inactivity traps. Obviously, other approaches to the incentive problem for low-wage earners are possible, such as (a) topping up lowskilled workers’ purchasing power by selective tax credits, (b) increasing their net pay by lowering personal social security contributions on low earnings, or (c) supporting sufficiently high minimum wages for low-skilled workers by selectively subsidizing employers. These alternative instruments reflect not only technical differences, but also more fundamental differences in approach. Therefore, it is useful first to assess alternative instruments from a normative vantage point, that is, by examining the conceptions of distributive justice underpinning their use, before assessing them with more explicit reference to the particular problems created by tax and benefit systems in economies plagued with involuntary unemployment.

In this paper we focus on this normative issue. Yet we start with a broader question, namely, why the problem of inactivity traps has gained heightened attention in debates on social policy over the last years. We present the idea of an active welfare state, which adopts increased participation as a central goal of social policy. In our view, this idea should also be based upon a responsibility-sensitive egalitarian conception of social justice. The active welfare state and responsibility-sensitive egalitarianism will act as the general background for our discussion of the relationship between a government's normative conceptions and its eventual choice of instruments.

Subsequently, we explain why defining a government as responsibility-sensitive egalitarian does not suffice to determine which distributive instruments it is supposed to choose. Making specific choices depends on the collective decision rule which is used and on normative positions taken by a government that do not reduce to responsibility- sensitive egalitarianism.