The following is an explanation of Welfare Capitalism.

Welfare capitalism refers to the practice of businesses providing welfare-like services to employees. Welfare capitalism was centered in high wage industries (not in the industries characterized by low pay, high turnover, child labor, or dangerous working conditions.) Many companies started offering higher pay and non-monetary compensation such as health care, housing, and pensions, as well as employment bureaus, in-house training, sports teams and social clubs. In the United States it was pioneered by George Pullman and Henry Ford, with high wages and subsidized housing. These coincided with state laws of the Progressive Era that outlawed child labor, imposed minimum wages and maximum hours; women received special protections and restrictions.

Two important goals, articulated by Ford with the $5 dollar daily pay rate, were to reduce turnover and build a long-term loyal labor force that would have higher productivity. The combination of high pay, high efficiency and cheap consumer goods was known as Fordism, and was widely discussed throughout the world.

Led by the railroads and the largest industrial corporations such as the Pullman Car Company, Standard Oil, International Harvester, Ford Motor Company and United States Steel, business provided numerous services to its employees, including paid vacations, medical benefits, pensions, recreation facilities and the like. (Brandes 1976) George Pullman built the most famous company town (Pullman, Chicago) as a paternalistic experiment – one ruined by the 1894 Pullman strike. For other company housing projects see (Crawford 1996)

By contrast Europe built government operated welfare systems. In the late 19th and early 20th centuries, Germany and Britain created “safety nets” for the citizens, including public welfare and unemployment insurance.

Western Europe, Scandinavia, Canada and Australasia are regions noted for their welfare state provisions, though other countries have socialized medicine and other elements of the welfare state as well. The United States, despite its Medicare, Medicaid and Social Security provisions, is not generally considered to have enough of a social safety net to properly be called a welfare-state; businesses provide more of these services.

Esping-Andersen categorised three different types of welfare states in the 1990 book ‘The Three Worlds of Welfare Capitalism’. Though increasingly criticised, these classifications remain the most commonly used in distinguishing types of modern welfare states, and offer a solid starting point in such analysis.

The three different types are the ‘Social Democratic’ Model, as exemplified by the Scandinavian countries and particularly Sweden; the ‘Liberal’ Model, often related to the USA, but also Canada, Australia and increasingly the United Kingdom; and thirdly, the ‘Conservative’ Model, which is indicative of Germany, as well as France, Austria and Italy.[vague]

Recently in the US there has been a trend away from welfare capitalism, as corporations have reduced the portion of compensation paid with health care, and shifted from defined benefit pensions to employee-funded defined contribution plans such as 401(k)s.