I agree that those who sit on benefits without looking for work should be penalised, but I also think employers have a greater responsibility to take people on, which I suppose comes back to government spending / banks investing etc.
All I know is that 4 years ago I took a gap year between my BA and MA to earn some money to pay for the Masters, and I didn't get a job until 6 weeks before the MA started; I applied for literally hundreds on hundreds of jobs and most companies didn't even acknowledge the application - soul destroying after a while, let me tell you - and when I did get an interview I was always told at the end that I was either over qualified or under experienced - or both! I eventually got a job through an employment agency I'd signed up with before I'd even finished my BA.
The jobcentre were less than useless, my advisor was more interested in discussing what her daughter was going to have to do to prepare for uni (as I'd just been apparently I was the uni oracle) and when I'd been on jobseekers for 6months they sent me on a two week course where I got to play quizzes with other doleites and at the end of it we had a day out canoeing in Wales, all at the taxpayer's expense. There was nothing at all job-orientated about any of it, but if I didn't go they'd stop my jobseekers - explain that! It's no wonder people don't bother working, the dole isn't really enough to support someone on its own, but if you get on disability, or have your rent paid for you as well it must be very lucrative if your only other option is minimum wage.