Policy Exchange said a new scheme – Route2Work – should be launched to boost the Work Programme, under which specialist charities and social enterprises would be paid to support people facing barriers to employment.
The Work Programme was the most appropriate form of support for most unemployed people, but support for those leaving the scheme without finding a job was currently “insufficient”, said Policy Exchange.
Its reports claims that 61 per cent of people on the Work Programme do not have basic numeracy and literacy skills.
Author Matthew Oakley said: “Large numbers of people joining the Work Programme have been on benefits for more than three years, many for over ten years. It is apparent that previous programmes have simply not worked.
“More effective support could be provided by working with specialist charities and social enterprises that can give intensive and personalised help. In this way, Route2Work will be more successful than any previous support programme in helping these individuals towards and ultimately into work.”
A Department for Work and Pensions spokesman said: “Figures from the industry last week showed Work Programme providers have got more than 320,000 people into work, but we know there are particular barriers facing many of the hardest to help which means it will take them longer to get into work.”
Overall, job vacancies have stabilised at just under half a million, but average salaries have fallen slightly, a separate study has found.
The number of vacancies stood at 460,000 last month, down by 0.1 per cent from April, after increasing in every previous month this year.
But the data, collected by jobs search engine Adzuna.co.uk, found wages were down by an average of £1,500 in real terms since a year ago.
Flora Lowther, head of research at Adzuna, said: “Rather than making redundancies and freezing hiring, employers are keeping a lid on the wages of existing employees and hiring new staff at lower salary levels.”