The Drug Foundation is calling for an end to people losing the benefit if they fail pre-employment drug tests.
The call comes as figures show that a record 47,115 beneficiaries were referred to jobs that required drug testing in the year to June and 170 of those failed the tests.
Past National government's viewed drug use among the unemployed as a major problem and introduced tough sanctions - fail pre-employment drug tests and have your benefit stripped.
"The reason you can't work is because you elected on Saturday night to smoke a joint," said then-prime minister John Key in 2010.
His successor Bill English said in 2017: "One of the hurdles these days is just passing the drug test."
The figures mean that for every 277 beneficiaries referred to jobs requiring drug testing in the past year, there was one failure.
Social Development Minister Carmel Sepuloni says the perception around drug testing and beneficiaries has "gone out the window".
"It actually isn't the dire problem that it was made out to be."
National's Social Development spokesperson Louise Upston says the fact that there's a relatively low failure rate is a good thing.
"People know their obligations."
The Drug Foundation wants the sanctions ditched.
"Let the numbers speak for themselves. Acknowledge that this was always a myth and let's stop hammering people who are already vulnerable and disadvantaged," said Ross Bell.
The Government only keeps records on how many beneficiaries were referred for job that requires a drug test, not how many tests are actually carried out.
And the 170 fail figure includes people who did not turn up to be tested.