In fact, welfare can help it greatly.
Capitalism requires some amount of consistent unemployment, so that labor remains competitive. It avoids scenarios where the workforce becomes disillusioned with the “community benefits” and slows down, but there’s no disincentive against slowing down because there’s more demand for labor than supply. This creates a snowball effect of more and more inefficient labor causing less production causing less community benefits causing more disillusionment causing more inefficient labor.
A small contingent of unemployment ensures that there remains an incentive to do well at one’s job. However, that doesn’t mean that these people have to live in squalor or lose opportunity. After all, it’s not their fault, the system needs them to be unemployed to maintain society. You want a competitive workforce, so by educating and training the unemployed, you ensure a degree of turnover between rising unemployed and less efficient employed. By guaranteeing a basic standard of living, you ensure that the unemployed are at least able to be happy, and to advance. The only thing you have to do is make sure there’s some incentive to return to or enter employment; this can be engineered through a high minimum wage, special non-essential benefits for the employed (could be anything, for example privileged entertainment [obviously this is just a “tier” of entertainment, it’s not like your’re going to deprive the poor of all entertainment]), or even cultural stigma (if the system is ingrained into culture, which can take time.)
Moral of the story: welfare in capitalism both patches up an unfortunate necessity, and helps the system by producing a happy populus.
This is generally the modern day Capitalist system but is by no means Free-Market Capitalism. This is fairly clear to you, I’m sure.
The primary case against Welfarism and the Minimum Wage is not aimed at leeches and is not meant to institute a policy that leads people to “live in squalor”; instead it evaluates the negative economic repercussions that these policies entail.
The first of these that come to mind is Inflation. Reality shows that with an increase production costs (such as minimum wage), we will witness an increase in the velocity of money, resulting in an increase in the general price level. New Keynesians may refer to this as Cost-Push inflation. It does exist.
Welfarism in general may also inflate the markets with artificial demand, especially depending on the types of programs that are set in place (do these include access to credit with low rates and insurance?). In whatever the case, we would witness more price inflation and a crowding out of markets (as resources will be allocated to where the market may not need it most).
The idea obviously has good-intentions and a certain amount of validity, but it can be self-defeating and destructive to a society, rather than helpful.