Abstract
The inequality of labor earnings among working-age individuals has gone up in all western countries during the past 25 years, either through rising wage inequality (US, UK) or through rising unemployment (Continental Europe). Policy regimes did matter a great deal, however, as far as the inequality of disposable income is concerned. In a country like France, transfers to the unemployed were sufficiently massive to prevent income inequality from rising. This paper argues that the way fiscal redistribution has managed to counteract skill-biased technical change in countries like France is somewhat paradoxical. The same distributive stability could have been obtained at a lower cost by following a job subsidies strategy rather than an income maintenance strategy, simply because it is always less costly to have people at work producing something. We explore several potential explanations for this paradox.
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