Nearly one in eight British households has no-one in work, the highest rate of the six largest EU economies, according to a think-tank report published today.
The UK has a total of 11.5% of households where no adults are working, compared to 10.5% in France, 9.2% in Germany and only 6% in the Netherlands, the Centre for Policy Studies (CPS) study has shown.
The proportion of jobless households in the UK has dropped from 12.5% in 1998 to 11.5% in 2009, the report, More Producers Needed, showed.
A 10% drop in the number of workless households would add around 1% to GDP, the study calculated.
It called for measures to tackle worklessness such as sanctions for benefit claimants who do not comply with training and labour market programmes.
Low skilled immigration should also be reduced, and there should be measures to ensure work pays, the report concluded.
The findings were published as the first phase of the Government's "radical" welfare reform programme began with benefit claimants starting to be reassessed for their ability to work.
The move comes as new figures showed that almost £135 billion had been spent over the past 10 years keeping two million people "on the sick".
Jill Kirby, CPS director, said: "This report shows that welfare reform is urgently needed to pull down the barriers between working families and those who are entirely dependent on benefits.
"Increasing work participation is important not just for the families involved, but also to strengthen the British economy and to aid recovery - a recovery in which everyone can play a part."