There is to be a cap on the overall amount of benefits a family can receive from the state.
The move is thought to result in unemployed families losing an average of £93 a week.
Chancellor George Osborne announced the plan due to be implemented from 2013, in his keynote speech to the Conservative conference in Birmingham.
The cap will be based on a median income after tax and national insurance, currently around £500 per week.
The Treasury claims the cap will apply to about 50,000 workless families, who will lose an average of £93 a week.
Osborne said: "Unless they have disabilities to cope with, no family should get more from living on benefits than the average family gets from going out to work.
"A maximum limit on benefits for those out of work. Set at the level that the average working family earns. Money to families who need it - but not more money than families who go out to work.
"That is what the British people mean by fair - and we will be the first government in history to bring it about".
Non-cash benefits, such as free school meals, will not be affected. Households claiming disability living allowance and war widows are excluded
