One in five working-age adults – about 8 million people – live in poverty. Two million of them report that they go without food at least once a month. And yet still the cruel, baleful cry goes up that our welfare system is over-generous. Address this longstanding sore once and for all and, according to the prime minister last weekend (supported by rightwing media commentary), honest-to-God workers would stop paying for millions of work-shy claimants and be rewarded with richly deserved tax cuts.

The numbers seem alluring. If you trust the surveys, nearly 3 million people aged between 16 and 24, and more than 6 million aged 24 to 64, are economically inactive – and the numbers are rising. In total, 9.25 million “idle” adults are drawing £88bn of universal credit a year, nearly half of whom complain they suffer from health problems.

“Is that so,” asks the right. Isn’t the greater truth that a good many are work-shy and game a medical profession that too easily signs sickness notes and identifies reactions to day-to-day unhappiness as mental illness? Look at those TikTokers boasting about living the life of Riley on benefits. The alleged sufferers from this epidemic should be forced to square their shoulders and work. Here is the root cause, the free marketeers say, of Britain’s economic and social crisis. What is wanted is some genuine conservatism to confront the whole anti-growth, woke, pro-welfare nexus.

It’s a view – but one at odds with what we know about human nature. Yes, there is now greater recognition that mental health issues menace lives. Doubtless, among the 9 million economically inactive there will be individual abuses. But the greater truth is that people are hard-wired to want to do something positive with their lives. They want to contribute, to earn, to add value. They don’t want to suffer from waves of disabling depression or a simple and sudden inability to concentrate. They want to associate with others and not live on the margins of society.

Britain does not have more than 9 million shirkers. Rather, it has millions of people who cannot physically or mentally participate in our wild west labour market that comes with an overstretched health service and a wholly inadequate training system. More than one in 10 jobs in Britain are structurally insecure, with no formal contract of employment.

According to figures from the Resolution Foundation, almost one-third of workers paid at or around the wage floor were underpaid the minimum wage; 900,000 workers reported they had no paid holiday despite this being a legal entitlement; and 1.8 million workers said they did not get a payslip.

Enforcement is very weak. The international standard is that there should be one labour standards enforcement officer per 10,000 workers: Britain has one for every 35,000 workers. On average, reports the Resolution Foundation, there has been less than one criminal prosecution a year for not paying the national minimum wage. The proposal to create one overarching enforcement agency has been stalled for five years. The work and pensions secretary, Mel Stride, is under pressure from his right to make access to paltry benefits even tougher: none to enforce labour market law.

Are benefits too generous? The Joseph Rowntree Foundation and Trussell Trust calculate that a single adult needs £120 a week to cover essential living costs even before rent and council tax; universal credit pays £85 a week. If payments matched pensions, as they did in 1948 when the welfare system was launched, universal credit would more than double. Britain has created a pauperised and traumatised underclass – small wonder the two charities call for an “essentials guarantee” of £120 a week. As they say, when benefits are this low, people are pushed further away from work so that even affording a bus fare to get to work becomes an impossibility. The choices that have to be made – between food, clothes, lighting and heat – lead to ill health. Too many of 7.6m cases awaiting NHS treatment come from the most disadvantaged: halve NHS waiting lists and the benefits bill will start to fall.

Too much work, especially at the bottom, is coercive and alienating. There is ever less autonomy, ever more micro-management and a shrinking capacity to shape what you do day by day. Personal autonomy, to feel that you have some control, is the key to mental wellbeing. It is too infrequently said, but the strengthening of trade unions is crucial not only to better pay but to the causes of fairer workplaces, employee engagement and a sense of control.

The Nordic system of “flexi-security”, in which employment contracts are flexible but married to a system of quality training and reasonable benefits, is widely admired as combining the best of both worlds, but it is managed by trade unions. British workers live in a country with weak and few trade unions, low benefits and where every apprenticeship has three applicants. “Good work”, which offers a sense of self-worth and control, is the privilege of a minority. Flexi-security and the benefits it brings are a pipe dream.

Labour’s proposed “new deal for working people” is a partial solution – reasserting worker rights that are properly enforced, boosting the capacity of trade unions to recruit and launching a system of fair pay agreements. Already watered down from its original ambition, it has come under more pressure from employers, including a reviving CBI. Keir Starmer has asked the shadow chancellor, Rachel Reeves, and deputy leader, Angela Rayner, to engage with business to explain the policies – but not to further water them down. These are Labour leaders with deep roots in ordinary workers’ experience of today’s workplace: they will have the courage of their convictions. The avenue to cutting economic inactivity lies not in making life even tougher for ordinary people, especially at the bottom; it is the fostering of much more “good” work. It is a dividing line between the parties that Labour should patrol with conviction – and pride.

• Will Hutton is an Observer columnist