WELFARE CAPITALISM

Welfare capitalism encompassed a wide range of private, firm-level social policies, including innovations in personnel management, employee representation, recreation, stock ownership, and cash benefits for retirement and unemployment and sickness. Benefits were most common and most expansive for "white collar" employees whose occupational status rested on loyalty to the corporation and mobility within it. In a limited fashion, benefits spread to small family-owned firms and company towns and then to large industrial concerns facing new challenges in labor and community relations. At the core of both the benefits provided and the often-onerous service provisions attached to them was the urgency of creating or recreating workers' dependence upon, and loyalty to, their employers. Employment benefits, and wages deferred to pensions, savings, or company stock, encouraged workers to equate their own economic future with the prosperity and good favor of their employers. "Many of you are now real 'partners' . . . because you have your share of the 'surplus profits,'" a 1920 circular of the Endicott-Johnson Shoe Company reminded employees, "your own selfish interest, now, demands that you protect this business" (Zahavi, 1988).

Welfare capitalism marked an important transition in labor relations. Many firm-level welfare policies (recreation, company housing, health and hygiene programs) reached back to late-nineteenth century or Progressive Era efforts to protect workers from the ravages of industrialization. Many policies (employee representation plans, stock ownership plans) tried to replicate or recapture the paternal relationship between employer and employee common in older family firms. Moreover, many policies (private pensions, sickness insurance, unemployment insurance) anticipated the private and public social insurance programs that would become commonplace after the mid-1930s. In most cases, a given firm's welfare program reflected all of these diverse motives and methods.

It is easy to exaggerate the scope and impact of welfare capitalism. While employers dispensed platitudes about "industrial democracy" or "employee loyalty" quite liberally, few devoted substantial resources to such programs, and most abandoned them when deferred wages could not meet their costs. The most promising and important private welfare plans, in this respect, also proved the most fickle. Industrial pensions, for example, were found primarily in larger Northern non-union firms. Yet while nearly 80 percent of workers in these settings belonged to a private pension plan, barely 4 percent of male workers and 3 percent of female workers ever met the underlying service requirements. Through the 1920s and 1930s, employers used pension plans with some success to avert strikes and moderate labor turnover. Private pensions were, like most welfare capitalist plans, noncontributory and discretionary: Workers had no "vested" rights in company pension funds, and employers could change plan rules or terms at their whim. Employers also proceeded with little appreciation of the actuarial demands or real costs of their pension plans and began to abandon them in the late 1920s. Similarly, private unemployment plans were widely trumpeted but adopted by only a few maverick firms (including General Electric) and a few industries (including the garment trades in Rochester, New York, Chicago, and Cleveland) that hoped that they might regulate competition by compelling continuous employment and curtailing the freedom of "fly-by-night" contractors.

Welfare capitalism also drew clear distinctions according to the gender or race of its beneficiaries. This discrimination was especially pronounced in white collar work, in which the managerial ranks remained a white (even Anglo-Saxon) enclave and in which fringe benefits helped to distinguish manly careers from the "pink collar" rank-and-file. In the industrial economy, programs for male workers focussed on masculine diversions (sports) or "breadwinner" wage-based benefits. By contrast, programs for women (mostly safety and personnel policies) were concerned largely with ameliorating the burden of work in such a way as to challenge the social and political assumption that women needed to be protected from wage labor. Black workers also had little claim on welfare capitalism–in part because such programs were rare in the agricultural and industrial labor markets in which black labor was concentrated and in part because employers routinely excluded or segregated black employees.

For its part, organized labor understood employers' motives and the conditional and limited nature of benefits. Through the 1920s, unions consistently opposed the introduction of employer-initiated welfare plans and, when plans were introduced in union firms, fought to ensure that they would be administered equitably. Workers and their unions, for the most part, understood welfare capitalism to be part and parcel of the "open shop" offensive against organized labor. The American Federation of Labor (AFL) dismissed welfare capitalism as both an alternative to higher wages and an aspersion on the masculine independence of its members. The position taken by AFL unions, and CIO unions after 1935, was that employment benefits were bargainable rights; in the contest over worker loyalty, such benefits should be won by the union and not conferred by management.

Welfare capitalism was truncated and transformed by the Depression and the New Deal. Many firms, already retreating from their welfare commitments, abandoned them entirely after 1929. Some firms, seeking to retain the benefits of welfare capitalism, encouraged the state to socialize their costs, and many workers turned to the state as private benefits evaporated. These pressures contributed to the passage of the Social Security Act in 1935. While federal social insurance programs and the emergence of the CIO after 1935 displaced many of the older welfare capitalist plans, important elements persisted. Non-union firms and sectors continued to use private benefits to maintain the loyalty of employees. Employers continued to offer benefits that supplemented either social security or collectively bargained benefits. Management continued to toy with New Era innovations in labor management, such as the company union. Yet many programs, most notably employment-based group insurance, remained at the core of the "private welfare state" (employment-based private health insurance and pensions) that emerged after the 1940s.

BIBLIOGRAPHY

Brandes, Stuart. American Welfare Capitalism. 1976.

Brody, David. "The Rise and Decline of Welfare Capitalism." In Workers in Industrial America: Essays in the 20th Century Struggle. 1980.

Cohen, Lizbeth. Making a New Deal: Industrial Workers in Chicago, 1919–939. 1990.

Davis, Clark. Company Men: White-Collar Life and Corporate Cultures in Los Angeles, 1892–1941. 2000.

Gordon, Colin. New Deals: Business, Labor, and Politics, 1920–1935. 1994.

Halpern, Rick. "The Iron Fist and the Silk Glove: Welfare Capitalism in Chicago's Packinghouses, 1921–1933." Journal of American Studies 26 (1992): 159–183.

Jacoby, Sanford. Modern Manors: Welfare Capitalism since the New Deal. 1997.

Klein, Jennifer. "The Business of Health Security: Employee Benefits, Commercial Insurers, and the Reconstruction of Welfare Capitalism." International Labor and Working Class History 58 (2000): 293–313.

Tone, Andrea. The Business of Benevolence: Industrial Paternalism in Progressive America.1997.

Zahavi, Gerald. Workers, Managers, and Welfare Capitalism: The Shoeworkers and Tanners of Endicott Johnson, 1890–1950. 1988.