Tougher sanctions brought in by the UK Government mean that benefits can be withdrawn for a range of reasons, from a person leaving a job voluntarily to failing to attend an interview.
The Welfare Reform Committee has recommended several changes to the sanctions regime, with convener Michael McMahon describing it as "broken".
Mr McMahon said: "When Neil Couling from the Department for Work and Pensions (DWP) came to committee and said people welcomed the jolt of being sanctioned, the committee was shocked.
"Our evidence says quite the opposite; being sanctioned leaves people with not enough money to make ends meet, certainly not enough to go out job hunting."
A spokeswoman for the DWP said: "Sanctions are only used as a last resort, but it's only right that people claiming benefits should do everything they can to find work, if they are able. We make it clear to people what the rules are and that they risk losing their benefits if they don't play by them.
"The benefits system is there as a safety net for people at times of need and supports millions of people who are on low incomes or unemployed. People who are in genuine need can apply for hardship payments. If someone disagrees with a decision made on their claim, they can appeal."