A report by the National Economic and Social Council says Ireland's labour market will take years to recover from the massive drop in the economy's performance since the financial crisis.
In a report on how unemployed people are currently supported, it called for a change in approach to prevent people being scarred for the rest of their lives by their current unemployment.
NESC called for the recently announced National Internship Programme to be extended beyond the current 5,000 places planned, adding that it could be used to raise the 'extremely poor' language skills of Irish graduates.
The Council, which advises the Government on economic and social policy, said significant groups of people who were not on the Live Register - such as the 'unemployed self-employed' or people whose partners continued to earn - needed more attention.
It urged an improvement in welfare-to-work strategies, saying these have been weak in Ireland.
Such policies, it said, should help people to achieve 'a sustainable independence' from benefits, rather than just a quick move off social welfare.
It also said that any sanctions against people who refused to co-operate should be 'fair, transparent and proportionate'.
On Government plans to replace FÁS, the report said the new agency must adopt a strong customer focus and train its frontline staff to high levels.
The NESC report also called for 'greater empathy and less suspicion' towards those who have lost jobs, adding that errors due to the complexity of the social welfare code - rather than fraud - were the main cause of social welfare overpayments.