Just one in nine people on the Government's flagship welfare-to-work scheme in Wales have found long-term employment, MPs have warned.
The Welsh Affairs Committee said the Work Programme's outcomes were worse in Wales than in other parts of Great Britain.
The MPs said they were concerned that the Welsh Government prevented Work Programme participants from also accessing a range of other publicly-funded training courses because of fears it could be in breach of European Union rules.
In its report the committee said: "One in nine people in Wales who joined the Work Programme in its first two years found sustained employment.
"Although this is not greatly dissimilar to the Great Britain average, we are concerned that the proportion of jobseekers who secure sustained employment through the Work Programme in Wales is the lowest in Great Britain.
"We are broadly encouraged that the Work Programme's performance has been improving over time, both in Wales and Great Britain.
"We note, however, that performance in Wales has fallen behind the Great Britain average for the most recent cohorts to have completed one year on the programme."
In Wales 69,590 people were referred by Jobcentre Plus onto the Work Programme during its first 25 months.
Of these, 7,550 people completed 13 or 26 weeks of sustained employment, the Government's targets, just 10.8% of those referred.
Cardiff Bay's Welsh European Funding Office has determined that Work Programme participants would not be allowed to access other courses supported by the European Social Fund (ESF) because it would break EU double-funding rules.
But t his is not the case in England, where customers are able to access Skills Funding Agency programmes which are part-funded by ESF.
The MPs said that was "detrimental to the performance of the Work Programme in Wales and, ultimately, for the opportunities available for the long-term unemployed" and called on Cardiff Bay and Whitehall to resolve the issue.
The committee also raised concerns about the two providers of the payment by results scheme, Working Links Wales and Rehab Jobfit, calling on them to "ensure that both they and their subcontractors have specific measures in place to support lone parents into work".
David Davies, the committee's Tory chairman, said: " The key issue here seems to be that there is a lack of flexibility in and between the various programmes set up to get people into work, and that this lack of flexibility appears to be more marked in Wales.
"It is obviously a matter of concern to us that the success rates in Wales are the lowest in Great Britain.
"The Work Programme is designed to help particularly people facing multiple barriers to entering or re-entering the workplace, people who have been already out of work for two years.
"The last thing we need in this situation is bureaucracy getting in the way of people simply being able to do what is most effective.
"The fact that different programmes are funded differently or run by different organisations should not be 'visible' or create barriers at the point of delivery.
"The point is to get people in to work, for all the benefits that brings both to them and to the public purse. That must be the sole focus and these artificial barriers must be removed."