What if the work isn't as seemingly useless as pushing buttons on an elevator, but rather being in charge of maintaining a block in your neighborhood. Picking up debris, sweeping the streets, painting the easement etc. It could help instill pride in peoples communities, give a sense of purpose etc. There are any number of functions like that which could be made in to "jobs" that could have positive effects on the community. I would tend to agree that this would likely be less "demoralizing".
Perhaps. However, it seems strange to think that a majority of people will be born to work for the State, and to be given what the State deems fit for their efforts. You cannot find other work, and you cannot get what you need to live unless you do what the State requires. It isn't entirely unlike Communism.
I would support people having more support if they were to work in a "community" program, weeding gardens in public parks etc. Perhaps if you qualify for the work, it pays more than a simple "hand out"? Could be something to aspire to and not automatically receive. Then there would be pride in obtaining the position.