The hairdresser is self-employed. So is the dog walker. So is the plumber who comes on behalf of the gas company to fix the boiler, despite the fact that his work seems to be controlled by a fascist computer system, timing him to the minute.

The cab driver is self-employed, even though you paid an app. The cleaner takes cash. The physiotherapist is self-employed, and, to prove it, is forced to lose money if the client does not turn up, even though the equipment and premises they work in are owned by a mid-sized company.

Around each of us is a network of human services, some of which are designed to cheat the taxman – and they are growing fast. There were 4.7 million self-employed workers in early 2016 compared to 3.25 million in 2001. Trade unions estimate that around half a million of those are bogus and are really working for a single employer, using the status to collude with that employer to pay less tax. But for them, the traditional trade-off of self-employment – lower tax and national insurance in return for fewer statutory benefits – is not always a choice.

So what do we do? Last week, Philip Hammond made the worst possible decision: to impose £2bn of new tax obligations – in the form of national insurance – on the medium-earning self-employed, without offering any quid pro quo. Labour opposed him, saying a rise in obligations should mean a corresponding extension of rights.

But beneath the argument lurks a much bigger challenge, which the controversies over national insurance contributions (NICs) serve to obfuscate. We are witnessing the end of utopias based on work. All political responses to this – whether at the level of employment law or tax codes – fail unless they grasp what is really happening.

In the debate on self-employment, you will hear politicians say that it suits some people to work flexibly, adding – via their facial expression – that they cannot really understand why. The reason why is clear: regular low-skilled work is so poorly paid and coercively managed that some people cannot stand it.

Self-employed people pay lower contributions, and functionally lower taxes. This is rationalised as an incentive to take risk, and means they must support themselves while sick, or through maternity leave and holidays. If everybody did this, both tax and national insurance revenue would collapse and along with them the welfare state – so the implicit logic is that it must be an exception. But since the crisis hit in 2008 it has beome the norm in many low-paid sectors of the economy.

In 2014 the government legislated that if a worker is “under the control, direction and supervision” of a construction company they must be deemed an employee, and the company becomes liable for NICs. In response, workers are being forced to operate via “umbrella companies” paying themselves a tiny salary and large dividends, to avoid tax.

That building site around the corner, then, embodies the ultra-capitalist dream: there are officially no workers there, only company within company within company, all taking advantage of generous capital allowances, tax-deductible expenses and self-assessment to reduce their tax burden.

This scam exists, like all the others, because of the massive inequality of power between employers and their workforce, and because government turns a blind eye.

But once you look at it from the low-paid worker’s point of view, the logic of self-employment becomes clearer. One of the big hidden secrets of modern drudgery is its sometimes coercive nature. In some sectors there is an implicit threat of violence; in others there is a threat of sexual harassment, punitive discipline and bullying.

Trapped between this world and a benefit system that is useless for short-term disruptions, many low-paid people see self-employment as an insurance policy: you can always quit and go somewhere else. And the ability to do so, in a tight labour market where your own boss is facing tough deadlines, gives you implicit bargaining power when faced with shouting or bullying or favouritism. In addition, the collusive nature of the deal – where both the boss and the worker avoid tax – reduces friction in the workplace.

Or, given the relentlessness of low-paid work, many young self-employed people operate a DIY form of work-life balance – choosing to work fewer than five days a week, in the knowledge that they will stay poor but have a life. They know such work arrangements offer no career path, no advancement – but they are at least free of the coercion and corporate brainwashing that can happen if you are at the bottom of the pile in a PLC.

So the term “self-employed” encompasses two realities – the old professional and entrepreneurial one and the new one of the precariat. Logic dictates that, even if you want to reverse the abuses, the government is still going to be dealing with expanded numbers of low-paid people who just do not see permanent, inflexible work for one employer as a life-defining goal.

So to avoid rising inequity, where fewer and fewer PAYE workers and legitimate companies are paying more and more of the tax, we need a rethink.

That must start with a serious crackdown in the exploiting sectors: construction, transport, private social care – on the understanding that it will hike labour costs and make some current business models impossible. The rule should be that if you work mainly for one company, and the client pays them – not you – you are probably not self-employed and should be paying tax at source, full NICs, and have full employment rights.

That should be possible to sell – despite the incentives of the current system – because most people beyond early adulthood want a decent job, not a gig. But it would still leave an expanded pool of independent workers, low-paid and effectively self-insuring against sickness and maternity leave. In the long run, although Hammond’s tax grab is a bad idea, they should contribute more via NICs, get a form of social insurance in return, and fewer income tax breaks. And their employers are going to have to pay the dog walker, the cleaner, the hairdresser and the physio more.

In turn, these employers have to demand regular wage rises – and the share of profits in GDP falls. We must, in other words, exert upward pressure on wage costs and resist the downward pressure that has fuelled the rise in precarious work.

If governments do not actively shape the workforce of the 21st century, it will shape itself, with a nod and a wink, around tax avoidance and casualisation. That’s not a gig I want to go to.