He instructed Industry, Trade and Labor Minister Binyamin Ben-Eliezer to submit an alternative plan with amendments within two weeks.
The plan was cancelled last weekend after expiring.
The prime minister said at the start of the cabinet meeting, "The 'Lights to Employment' plan (Wisconsin), which wad carried out as a pilot in several cities in Israel, managed to put 18,000 people to work. Ending the plan is a blow to the labor market and to our ability to send citizens to work.
"If we manage to pass this plan it will bring Israel to the accepted place in this field in Europe and the Western world, and we will become one of the most progressive countries.
"The failure to work is one of the most difficult problems which we must fight, and we will fight them during the Knesset's current session."
Finance Minister Yuval Steinitz criticized the decision made by the Knesset's Labor, Welfare and Health Committee to freeze the plan. "Up to now, we have managed to avoid a high unemployment rate of 10-20% like what is happening in Europe and the United States. Last week, our war on unemployment suffered a heavy blow when the Labor and Welfare Committee failed to renew the plan. In fact, the failure to renew the plan is outrageous and may push thousands of Israelis out of the work market."
The finance minister added that "the decision to cancel the plan is afflicted with cheap populism and irresponsibility. The prime minister and I decided this morning to present an expanded nationwide employment plan, and we have no intentions of giving in to populistic pressure."