Capitalism is definitely working as intended; I'm not disputing that. But there are two catches:

1. The intent of capitalism is that, over time, the free market adjusts to what is optimal. Capitalism doesn't say anything about how long that takes, about what the time constant for a certain input to the market is. While the market is responding to a transient, it operates inefficiently. (This is the entire reason, for instance, that non-manipulative high-frequency trading is profitable.) My position is that capitalism is doing what it's supposed to be doing slowly; certainly over the generations we have seen things get better for laborers. But I think we can achieve those goals faster, and speaking selfishly as someone who is not immortal, I'd like to do that.

2. The history of labor organizing is filled with government intervention removing the natural right of laborers to negotiate as participants in the market, while preserving (and perhaps creating) the right of managers to negotiate collectively under the legal form of a "corporation." Even today we have so-called "right-to-work" laws that interfere in free market negotiations between workers and managers, saying that certain private contractual agreements are invalid and cannot be negotiated. If the government stops interfering in the free market, capitalism will achieve its goal more effectively.