The Council of Trade Unions says the Government's Social Security Amendment Bill is the wrong approach during an unprecedented time of high unemployment and looming redundancies.
The second piece of legislation enacting National's welfare changes passed through its committee stages in Parliament on Tuesday night.
The bill introduces sanctions for work-tested beneficiaries who refuse offers of suitable employment without good reason.
Social Development Minister Paula Bennett says the CTU is scaremongering and failing to see benefit dependency.
She says the current unemployment situation is not the worst this country has ever seen but it could be better, which is why the Government is focused on getting people into work.