Too many young people are unable to get jobs when they leave school because they cannot read, write or do basic sums, according to influential employment experts.
Major policy changes are urgently needed to improve basic skills among school pupils, according to a damning report from the Wales Employment and Skills Board (WESB), which includes representatives from education and local government, as well as business.
Despite "enthusiasm and commitment" from the Assembly government, not enough progress is being made, its second annual report finds.
It calls for the government to monitor every pupil's progress in literacy and numeracy throughout their education and to set an "extremely challenging target" for minimum levels among school leavers.
The report also says a range of measures are needed to "dramatically improve" the employability of young people leaving school and college.
"Employers are extremely concerned that a significant proportion of young people still leave 11 years of compulsory education without being able to read and write to the standard required for employment or to undertake simple arithmetical calculations," it says.
"We are adamant that this cannot continue and that, since present policy is not delivering the necessary outcomes, present policy and policy implementation needs to change."
The WESB wants all heads and classroom teachers to have a basic skills teaching qualification and for them to be given at least one dedicated Inset training day a year so they can take responsibility for improving pupils' basic skills.
Its report calls for a "concerted" national campaign to encourage employers to offer more work experience to pupils and for schools to set aside more time for it to happen.
All secondary schools should publish an "employability skills plan" explaining how they will make their pupils work-ready.
The report also says a formal graduation ceremony recognising a minimum set of achievements could be a "powerful motivation" for pupils. "This could become a guarantee of the minimum employability skills which employers would warmly welcome," it says.
Launching the report last week Sir Adrian Webb, chairman of the WESB, said tackling youth unemployment was a priority.
As TES Cymru revealed recently, the Assembly government has abandoned its 2010 target of getting 93 per cent of young people into employment, education or training after a surge in the number of Neets, which it blamed on the recession.
Sir Adrian said there should be a target date of 2015 to halve the long- term level of joblessness among young people, and the figure should be reduced to pre-recession levels by December 2011.
"Research shows that being unemployed when young is likely to lead to long-term problems, and 25 years later people still suffer from lower wages, lower skills and job insecurity," he said. "If we do not tackle the problem now, the social costs will be high in the years ahead."
Gareth Jones, secretary of the Association of School and College Leaders Cymru, said that while heads would share the aspirations of the report, they would have some "fundamental problems" with it.
"There's a danger of penalising the majority by trying to tackle the problems of the minority," he said.
Mr Jones added that there would be "considerable reservations" about the proposed "employability skills plan", which could be seen as a return to league tables. "It would be yet more paperwork when we should be looking at delivery," he said.
Leighton Andrews, the education minister, welcomed the report: "This will play a crucial role in ensuring we equip our young people with the right skills to take advantage of the opportunities which the economic upturn will offer."
Original paper headline: School leavers damned as unfit for purpose by angry employers