Wal-Mart is a good example of government making their low prices possible by offering social welfare programs for their workers, which allows their workers to be paid less and still maintain a sustainable lifestyle.
We had some good discussion on this subject.
I ended up convinced that when a Walmart worker starts receiving benefits from a rich uncle (be it Uncle Sam or some other relative), that worker is less inclined to continue working at Walmart; if Walmart responds with any change it will be to make the job more attractive, such as raising salary or benefits.
How Welfare Hurts Walmart is a short argument from a source you may sympathize with.
Public Assistance, Private Subsidies and Low Wage Jobs is a long argument from a minimum wage advocate.
Both point out that the Earned Income Tax Credit is an exception: it is a benefit that requires having a job, giving more incentive to work. But other benefits not tied to employment reduce the incentive to work. When people have less incentive to work, employers must sweeten the pot.
But what about other programs like food stamps or housing assistance? These means tested public assistance programs are not tied to work, and we should not expect them to lower wages. Let’s take food stamps, which are available to eligible families whether or not a family member works or not. Indeed, when people are not working, they are more likely to be eligible for food stamps since their family incomes will be lower. Therefore, SNAP is likely to raise, and not lower a worker’s reservation wages—the fallback position if she loses her job. This will tend to contract labor supply (or improve a worker’s bargaining position), putting an upward pressure on the wage. Whether or not wages are increased is an empirical matter: there is evidence that the initial roll-out of the food stamps program across counties in the 1970s lowered work hours, consistent with an increase in the reservation wage. The key point is that it is difficult to imagine how food stamps would lower wages. And if they don’t lower wages, they can’t be thought of as subsidies to low wage employers.