Three quarters of a million young people in Britain believe they "have nothing to live for", the Prince's Trust has warned.
The findings showed that 40 per cent of young people have faced symptoms of mental illness, including self-loathing and panic attacks, as a result of being out of work.
The survey also found that long-term unemployed young people across the UK are more than twice as likely as their peers to have been prescribed antidepressants.
Of those polled, 9 per cent said they have "nothing to live for" with those stuck in long-term unemployment feeling particularly pessimistic about their prospects in life (21 per cent).
If applied to the whole population, this would equate to 750,000 people aged 16 to 25, according to the youth charity.
Out of all participants, 281 were classified as not in employment, education or training, and 166 of them had been unemployed for more than six months.
Martina Milburn, chief executive of the Prince’s Trust, said: “Unemployment is proven to cause devastating, long-lasting mental health problems among young people.
"Thousands wake up every day believing that life isn’t worth living, after struggling for years in the dole queue."
The youth charity called for immediate action from the Government, health agencies and employers as it warned of the devastating consequences of long-term youth unemployment.
Shirley Cramer, chief executive of the Royal Society for Public Health, said: "Unemployed young people are struggling in many aspects of their lives, from their mental health and wellbeing to their relationships and their qualifications and we must act quickly to end this."
Almost a million young people are out of work, education or training in the UK with more than 440,000 of them facing long-term unemployment, according to the youth charity.
The report comes after the Government announced plans to reduce benefits for the under 25s in a bid to get Britain's youth "learning or earning".
The Prime Minister took a hard line against welfare during the Tory party conference in Manchester, criticising the notion that thousands of Britons conform to a life on benefits.
"With your children, would you dream of just leaving them to their own devices, not getting a job, not training, nothing? No, you'd nag and push and guide and do anything to get them on their way.
"This is what we want - everyone under 25 earning or learning," he said.
The Prince's Trust Macquarie Youth Index was based on interviews with 2,161 teenagers and young adults aged 16 to 25.
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