Well, as I understand the quote (though I admit is not clear then) the prisoners are not incentivated, but probably forced, while the rest are incentivated. Neither talks it about those prisoners being without trail or kidnapped...
Prisoners without trial are mentioned in A:1, though, but we also must remeber this is prior to 3I (as Traveller, not in its chronology), and so it's not really 3I. In 3I it would be difficult to have prioner (with or without trial) an Imperial Senator, mostly because there's no Imperial Senate for this Senator to be ....
This doesn't void your main point, though: 3I is a dystopia, and most of its citizens live under opresive governments. And you need only look at the UWPs to see it, or even to the World creation rules, as HiPop worlds (that even if represent a small part of the worlds, they represent the vast majority of citizens) cannot be democracies (at most, part of them may, if it is balcanized), being governed mostly by autocrats, burocracies or oligarchies.
But even under those governments, that can be more or less benevolent and may care or not for their citizens, high TL is likely to have improved life expectancy and improved life conditions, if only because they are more likely to have vaccining programs (that don't work if only a minority is vaccined), better hygiene and sanitation, and all those unsung heroes that are the main responsibles of the increased life expectancy (and even in good health). Even current poor people in places where the governments have little care for them, they have (barring violent death) higher life expectative than a medieval, or even latter Duke.
In this way, it's also interesting the T4 main book sidebar called What is poverty at TL12 (page 64), where it's told how a poor at TL12 has better life conditions than a middle class at TL6...