Almost one in five young people in the UK are not educated to A-level standard, leaving the nation lagging behind countries such as Slovenia and Estonia.
New figures published by the Organisation for Economic Co-operation and Development (OECD) put the UK 25th out of 35 developed nations in terms of the numbers of 25 to 34-year-olds who did not stay in education up to the age of 18.
The statistics show that 18% of UK young people in this age group failed to achieve an "upper secondary" education - the equivalent of A-level standard.
This is only slightly better than the OECD average, which stands at 19%.
But it does leave the UK trailing behind countries such as Korea, the Slovak Republic, the Czech Republic, Poland and Slovenia, which were at the top of the table with very low percentages of 25 to 34-year-olds failing to complete upper secondary education.
Other nations including Israel, Estonia, Germany, Ireland and France are all ahead of the UK, although countries such as Greece, Italy and Spain are behind with large non-completion rates (of 25% or higher).
In its report, Equity and Quality in Education: Supporting Disadvantaged Students and Schools, the OECD warns that high drop-out rates leave students without the skills they will need in the job market.
Explaining the impact, OECD senior policy analyst Beatriz Pont said: "It's very costly economically, due to loss of opportunities, and because there's low employment rates, low contributions to taxes and worse health outcomes."
The report says that the youngsters who are most likely to leave school without good qualifications are those from poorer, or immigrant families.
It sets out a series of recommendations designed to stop young people dropping out of school too early and to boost the numbers staying on to take A-levels or equivalent vocational qualifications.
The OECD says that students should not be "grouped" or put into sets too early as there is evidence that "academic selection widens achievement gaps and inequities".
The report says that putting children into lower streams fuels a "vicious cycle" of student and teachers' expectations.
Teachers can have lower expectations, particularly for disadvantaged or low-performing children, and students adjust their expectations and the effort they make, which can lead to even lower performance, it said.
"Students from lower socio-economic backgrounds are particularly affected by academic selection and in particular by early tracking," it says.
The OECD also calls for parents' choice of schools to be "managed" to stop schools being "segregated" by ability, background or ethnicity.
Ms Pont said: "You have to give parents enough choice to be able to choose the right school for their child, but with improvement of equity taken into consideration."