The number of 16 to 24-year-olds claiming unemployment benefit for more than 12 months has increased fourfold since before the recession. Young people claiming jobseeker's allowance jumped from 5,840 in 2008 to more than 25,800 this year, according to a report by the Prince's Trust and RBS.
The massive rise has left the UK with a much higher youth jobless rate than many other European countries, including Germany, Denmark, Austria, Norway and the Netherlands.
Prince's Trust chief executive Martina Milburn said: "The annual cost for a jobseeker can be as much as £16,000. The argument for intervention and support is unquestionable."
Employment minister Chris Grayling said: "The patchwork of ill-conceived schemes we inherited from the last government failed young people across the country. That's why we're investing in apprenticeships to create long-term jobs and are developing work-experience opportunities so that young people get the skills and experience they need to successfully compete."
The TUC's general secretary Brendan Barber said: "While the Government focuses all its energies on spending cuts, the prospect of losing a generation of young people to unemployment and under-achievement looms ever larger.
"A million young people lost their jobs in the recession, crucial education and job-support schemes have been scrapped and they'll soon be priced out of going to university. It's no wonder young people are angry about being left high and dry by this government."