Ministers should integrate health services into job centres to unlock a hidden workforce of about 3 million “economically inactive” people who are without jobs, according to pioneering research that could provide a blueprint for government thinking on the labour market. The report, billed as the biggest single in-depth study of long-term worklessness, argues that a regime based largely on benefit sanctions has achieved little, and any serious effort to tackle economic inactivity must offer personalised help based on health. Local NHS integrated care boards should be tasked with working alongside regional mayors to help people back into work in their areas, it says. The report from the Pathway to Work Commission is being launched on Tuesday, but the Guardian has seen elements of its conclusions in advance. It is based on evidence from more than 700 people in Barnsley, South Yorkshire, who are considered to be economically inactive – defined by the ONS as those not in employment who have not been seeking work within the last month. Researchers also spoke to employers, experts and others as part of the project which was led by Alan Milburn, the former health secretary under Tony Blair. While it was set up by local and regional authorities, its likely resonance with national government priorities is clear. Other members of the commission include Torsten Bell, the former head of the Resolution Foundation thinktank who is now a Labour MP, and the current and former Labour mayors of South Yorkshire, Dan Jarvis and Oliver Coppard. Jarvis is now an MP. Milburn is also understood to have been in touch with Liz Kendall, the work and pensions secretary, and Wes Streeting, the health secretary, with Keir Starmer’s government keen to address economic inactivity as it pushes for higher growth. The year-long study notes that about 2.8 million economically inactive people across the UK are unable to work due to long-term ill-health, whether physical or mental, and that while the reasons behind this are complex, health must be central to efforts to tackle the issue. Currently, it says, the jobs and benefits system is over-simplistically based around targeting people with sanctions if they do not find employment, and focuses on those seeking work rather than the much larger group – about twice as big – who are classed as economically inactive for health reasons. Policymakers had, one commission source said, relied on “toughening benefits rules to deal with what is a largely health-related problem”, adding: “It is a legacy system that is stuck in the past.” Too much of the work of Jobcentre Plus staff is to do with administering benefits rules and getting people into any sort of work rather than career progression or better earnings and ignores those who are economically inactive, the report says. Local areas should instead offer personalised support and advice to people who want to work and to employers looking for staff, with a central role for NHS care boards. Milburn said: “The one-stick benefits sanctions approach of recent years has failed. The previous government pointed public policy ammunition at the wrong target. Unsurprisingly they kept missing. “With a new government in place and inactivity rates that show no sign of slowing down, this is the moment for a fundamental change in direction. The country cannot afford to have a whole generation of young people consigned to a life devoid of both work and hope.” Milburn remains influential in Labour, and chaired the Social Mobility Commission for five years from 2012. The report comes as Starmer and his education secretary, Bridget Phillipson, were poised to launch a body called Skills England on Monday, intended to bring cohesion to what is described as a fragmented system of skills training. With Richard Pennycook, the former chief executive of the Co-operative Group, announced as interim chair, the organisation is tasked with uniting central and local government as well as companies, unions and training providers to bring a post-16 skills system more relevant to the jobs market. Starmer said: “Our skills system is in a mess, which is why we are transforming our approach to meet skills needs over the coming decades. “They will help to deliver our number one mission as a government, to kickstart economic growth, by opening up new opportunities for young people and enabling British businesses to recruit more homegrown talent.”