Welfare Capitalism
Welfare capitalism is a system of private, employer-based social welfare provisions that first gained prominence in the United States from the 1880s through the 1920s. Promoted by business leaders during a period marked by widespread economic insecurity, social reform activism, and labor unrest, it was based on the idea that Americans should look not to the government or to labor unions but to the workplace benefits provided by private-sector employers for protection against the fluctuations of the market economy. Welfare capitalism, according to its proponents, was a new, more enlightened kind of capitalism, based on the ideals of corporate social responsibility and business-labor cooperation rather than unfettered individualism and class conflict. It was also a way to resist government regulation of markets, independent labor union organizing, and the emergence of a welfare state. For all its promise of industrial harmony, welfare capitalism was a way to keep private employers firmly in control of labor relations.
U.S. businesses began to adopt a variety of what were initially known as "welfare work" practices in the 1880s. From the beginning, the benefits employers offered were inconsistent and varied widely from firm to firm. "Welfare work" encompassed minimal benefits such as cafeteria plans and company-sponsored sports teams as well as more extensive plans providing retirement benefits, health care, and employee profit-sharing. By far the most elaborate and ambitious of the early plans were the company towns, such as the one established by and named for railroad car manufacturer George Pullman in 1881, just outside of Chicago, Illinois. In Pullman, as in the company towns established by textile mill owners in the South, workers lived in company-built houses, shopped at company-established stores, played at company-provided recreational facilities, went to company-hired doctors, and were often expected to worship at company-sanctioned churches.
Portraying themselves as benevolent father figures, many employers sought to exert parental authority and control over their workers as well. Thus, workers drawn to car manufacturer Henry Ford's promise of high ($5.00 a day) wages were subject to home inspections and a strict moral code as conditions of employment. Other employers offered cooking, hygiene, and language classes in efforts to regulate and "Americanize" their immigrant workers. Welfare capitalists went to greatest lengths, however, in efforts to quash independent union organizing, strikes, and other expressions of labor collectivism—through a combination of violent suppression, worker sanctions, and, as welfare capitalism became more widespread, benefits in exchange for loyalty.
By the 1910s and 1920s, welfare capitalism had become an organized movement with a diversifying base of business, social, scientific, and political support. It had also become the leading edge of the quest for corporate competitiveness and efficiency: benefit packages, employers reasoned, would attract a higher skilled, more productive, and stable workforce. Even at its height, however, welfare capitalism left the vast majority of workers without adequate social welfare protection and actively discriminated against low-skilled, non-white, and female wage-earners. Since employer benefits remained unregulated, companies could—and did—abandon their obligations during hard times.
The Great Depression of the 1930s brought the inadequacies of welfare capitalism into sharp relief, as New Deal policymakers joined labor leaders and reform activists to establish the basis of the modern U.S. welfare state. Far from retreating, welfare capitalists subsequently adapted to the era of public provision and stronger labor unions. Private employer benefits, subsidized by tax incentives, became an essential supplement to the basic government safety net and a key bargaining chip in negotiations with organized labor. There is considerable cause for concern, then, that recent decades have seen a dramatic decline in the percentage of the U.S. workforce covered by employer-provided health, pension, and other benefits—especially as these declines have been accompanied by significant reductions in the public provisions of the welfare state.
Bibliography
Gordon, Colin. New Deals: Business, Labor, and Politics in America, 1920–1935. Cambridge, U.K.: Cambridge University Press, 1994.
Jacoby, Sanford M. Modern Manors: Welfare Capitalism Since the New Deal. Princeton, N.J.: Princeton University Press, 1997.
Tone, Andrea. The Business of Benevolence: Industrial Paternalism in Progressive America. Ithaca, N.Y.: Cornell University Press, 1997.
