Those out of work for more than two years should not be able to turn down a job and go on claiming benefits, the left-leaning Demos think-tank said.
The proposal would be at the heart of a "liberation welfare state" tackling unemployment rather than social problems such as family breakdown, the Liberation Welfare report said.
Calling for the biggest overhaul of the 158 billion welfare state in 20 years, it also said benefits should be higher but harder to claim, and people should save for "shocks" such as redundancy.
A work guarantee for the long-term jobless would mean a guaranteed state job after two years. But anyone who turned down a job would lose benefit. It said: "People would not be able to choose to refuse a job and continue to receive benefits."
Co-editor Graeme Cooke added: "The 160bn question is, do the political parties have the courage to reform welfare so it liberates people rather than traps them in dependency?"