Ministers are considering "enforcement measures" to make sure all young people stay in education or training until 18 from the year 2013.
Alan Johnson, Education Secretary, this week said the proposal would be the centrepiece of the coming green paper. He also confirmed plans to act against employers who fail to train staff.
He was spurred on to take a tougher line after independent research for the Government showed nine out of 10 people backed the move to keep all young people in school, college or work-based training.
There would, he said, be a "carrot-and-stick" approach with "cash incentives or punishments" for young people. He also made it clear that he would take a strong line against employers who failed to measure up.
"Last year's National Employers Skills survey showed more than a third of employers hadn't carried out any training within the previous 12 months,"
Mr Johnson said.
"Barely four in 10 employers could be described as `committed trainers'. As long as such attitudes prevail, it will be impossible to meet the challenge set out in Leitch (the Treasury-commissioned UK skills review)."
Lord Leitch's review pointed out that 70 per cent of the workforce for the year 2020 had already completed compulsory education.
The Government had put a range of measures in place to improve basic skills, Mr Johnson added. "But it is only if training is business-led that we can be assured that our skills gap will be filled."
The independent research Raising the Education Age was carried out for the Department for Education and Skills by TNS Consumer Omnibus. Three-quarters of the 90 per cent of people backing plans to raise the compulsory education leaving age did so "strongly". Two-thirds of adults thought it should be a legal requirement to stay on However, only six out of 10 young people thought it a good idea.
With more than 100,000 16 to 17-year-olds in work but not being trained, Mr Johnson said, "we need to look at how we can counter the ingrained attitudes which underlie the depressing statistic."
Speaking at a conference organised by Skills for Business, he said educational failure made young people "ideal fodder for the drug dealers and pimps".
The year 2013 was chosen as the date to raise the leaving age because that is when the full range of new 14-19 diplomas would be available, "so, those children starting secondary school next year will be the first cohort to know they will be required to stay on for longer," Mr Johnson said.
The whole system of grants and allowances 16-plus was also up for review.
"Do we want to develop or replace the Education Mainte-nance Allowance? Or do we need a completely fresh approach?"
Lord Leitch's report had shown the urgent economic need for higher achievement, he said. "By 2020, 40 per cent of jobs will require graduate qualifications, and the number of unskilled jobs will diminish from 3.6 million now to around half a million.
Employers fail to take free training, page 5