Union leaders have called on the government to increase unemployment benefit in next week's pre-Budget report.
In a report published on Wednesday, the TUC said that people losing their jobs as a result of the economic downturn faced a bigger cut in living standards than those left unemployed in the last recession.
Increasing jobseeker's allowance from the current £60.50, and cutting taxes, would help boost the economy and prevent hardship, the report claimed.
It also called for changes to the way redundancy pay is calculated and to allow the newly unemployed to keep more redundancy pay before it is liable to tax.
TUC general secretary Brendan Barber said: "Putting more money into ordinary people's pockets must be part of the response to the recession.
"Tax cuts have a role, but there is an even stronger case for boosting unemployment benefit. It is the quickest way to stimulate the economy and protects the newly unemployed from a catastrophic fall in their income."
Pointing out that unemployment benefit breaks down to less than £10 a day, he added: "Going from a typical wage down to this poverty income will be a terrible shock for people losing their job through no fault of their own.
"The gap between benefit and earnings has grown because the government wants to look tough on scroungers.
"We have never agreed with this approach as it hits those making every effort to find work as hard as anyone who is abusing the system. But with unemployment now climbing every month, there can be no case that poverty level benefits keep unemployment down."
Barber called on ministers to close tax loopholes "the super-rich use to avoid paying a fair share".
"There will be some justice in making many of those who did spectacularly well from the unsustainable asset bubble that has now burst contribute to helping their victims," he added.
