Social Development Minister Paula Bennett announced the $62 million would be allocated to the new "Job Streams" package during the next year.
The wage subsidies of up to $21,000 would be given for a year and available for youth, those on the Domestic Purposes Benefit and those on the sickness and invalid's benefits.
It would replace six programmes currently funded from the $92 million fund for employment assistance, including existing wage subsidy scheme Job Opps and the industry training scheme Straight to Work.
The remaining $30 million would be used to continue funding for foundation training courses such as Limited Service Volunteers and Outward Bound.
Ms Bennett said the existing programmes were effective, but over time they had become too complex and involved too much red tape for employers.
She said the new scheme allowed for more flexibility - and also allowed Work and Income to provide more funding for those who faced greater difficulties in finding jobs - including those with disabilities, former prison inmates or those who had not worked for a long time.
Ms Bennett said subsidies for such employees would be higher than for young people with skills or experience.
Council for Trade Unions Secretary Peter Conway said there was a need for flexibility in the subsidies provided to get the unemployed into work, but said it needed to be on a larger scale rather than simply repackaging existing schemes, especially with stricter work-testing requirements coming in for those on benefits.
Ms Bennett said the primary target of the new programme would be young people, but it would also apply to those on benefits.
The funding would be allocated regionally and Work and Income offices would decide what level of funding would be attached to individual workers when they got jobs.
The other programmes that would go to make way for the new scheme would be Skills for Growth, the Skills Investment Subsidy, Regional Contracted Services and Training for Work.
Prime Minister John Key said the number of unemployed youth dropped from 23,000 to 13,000 during the past two years, but remained a critical issue the Government wanted to address.
