Labour has said it would offer the long-term unemployed a guarantee of a six-month job if it was in government.
Businesses would be given subsidies to hire people on a temporary basis, with those refusing a suitable job having benefits docked.
Labour said the move sent a "clear message" about its stance on welfare but admitted it could not commit to the scheme if returned to power in 2015.
David Cameron said the opposition was avoiding hard choices.
BBC political correspondent Vicki Young said Labour were setting out what should be done now rather than committing themselves to the measures if they were returned to power after the next election or making a future spending pledge.
The announcement, she added, had to be seen in the context of the political debate over welfare reform and government accusations that Labour are not committed to reducing welfare bills and sanctions for those not prepared to look for work.
Labour said its plan, intended to help 129,400 people out of work for two years, would be funded by restricting tax relief on pension contributions available to higher-rate taxpayers.
The long-term unemployed would be offered 25 hours of work a week in the private or voluntary sectors at the national minimum wage for six months.
Welfare debate
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Shadow work and pensions secretary Liam Byrne: "If you want welfare to work to genuinely work, then you need jobs"
The scheme expands Labour's existing jobs guarantee proposal which has up to now only covered 16-24 year old job-seekers.
Labour's shadow work and pensions spokesman Liam Byrne said the long-term unemployed needed to be "working or training and not claiming".
"I know that will be a culture shock for many people but for many more it will be a lifeline," he told the BBC News Channel.
"There is a vital principle at stake here," he added.
"The government promised us an awful lot on welfare reform...What is now happening is long-term unemployment is going through the roof. That is pushing up the welfare bill and to balance the books the government is having to raid working families tax credits.
"We are saying there is a different way to bring the welfare bill down."
'Tough and fair'The proposed subsidies, he added, were an acknowledgement of the fact that businesses expected to make a profit and would not take on new staff "for nothing".
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Conservative chairman Grant Shapps: "You can't spend the same money twice"
While the headline rate of unemployment has fallen in the each of the last seven months, Labour says the number of long-term jobless is nearly 150% higher than in late 2010.
At the end of Labour's six-month scheme, workers would have to find a permanent job or revert to claiming jobseeker's allowance.
The £1bn cost of the scheme - which Labour hope could eventually be extended to those out of work for 18 months or a year - would be funded by introducing a 20% limit on tax relief on pension contributions for those earning £150,000 a year or more.
Labour said the 50% limit on tax relief on pensions for the highest earners should be brought into line with the 20% level for basic rate taxpayers - a proposal which is similar to one announced in 2009.
'One Nation approach'Ministers say the Work Programme, in which firms and charities are paid to help find jobs for the long-term unemployed, is "on track" despite opposition criticism.
Figures published in November showed only 3.53% of people on the scheme found a job for six months or more - against a coalition target of 5.5%.
But the government insists progress is being made and that nearly 10% of the initial participants have got into work and stayed there for six months, while 50% of those who have taken part have come off benefits.
In an interview with BBC 5 live Breakfast, Mr Cameron said a million private sector jobs had been created since the coalition government came to power in May 2010.
"We are dealing with the deficit. We are cracking long-term problems that have faced the country for too long. We are seeing a rebalancing of the economy."
In contrast, he said Labour was "just not focused on the big challenges" confronting the UK such as the need to secure sustainable growth and reform welfare.
The Treasury said Labour had earmarked cuts in pension tax relief to reverse austerity measures and was effectively spending the same money twice.
While it remained opposed to government cuts in tax credits, Labour said it could not commit to reversing the changes until it had seen the state of the public finances after 2015 and the money was now needed to help people into work.
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