A crippling skills gap is hitting nearly half of all Welsh firms recruiting school and college leavers, a major new report has found.
A survey of 6,000 employers and 6,000 workers by Future Skills Wales revealed that learning providers were failing to deliver the skills bosses need.
The research highlighted a lack of understanding of customer needs, poor communication skills and an inability to show initiative among employees.
Richard Keveren, head of skills, training and careers policy at the Welsh Assembly Government, said the survey had alarming results.
He said: "It is disappointing we still have basic skills problems and that many youngsters do not have the skills employers want.
"There has been progress in the past five years. The number of hard-to-fill vacancies has dropped by half. But some of the findings are quite alarming."
The survey found more than half - 53 per cent - of off-the-job training goes to managers, with only 10 per cent to operatives and low-skilled workers. Nineteen per cent of employers raised fears of a continuing skills divide.
Fewer than half of workers said their bosses discussed training needs and workers generally rated their skills higher than their bosses did.
The report also identified a need for huge investment in IT training to meet expected demand increases over the coming three years.
Bosses revealed they valued understanding customer needs and teamwork above numeracy and literacy.
The pound;740,000 survey, published last week, was commissioned by Future Skills Wales, a partnership which includes the Welsh Assembly Government, the funding agency Education and Learning Wales (ELWa), the Sector Skills Development Agency and Jobcentre Plus.
Mr Keveren said the results from the last survey in 1998 were broadly similar. They led to the setting up of a skills taskforce which reported in October 2000 and resulted in the Skills Action Plan for Wales.
He said the action plan would now be revamped, but denied that indicated it had been ineffective.
He added: "We are not going to have immediate fixes. It is a continuous improvement process which involves hearts and minds, and we need to encourage people to take the first steps on the training ladder.
"There is an interesting dilemma about basic skills. Without basic skill qualifications, applicants will not get a job interview. But once people are working, employers want them to show initiative, follow instructions and understand customer needs and so on.
"Information from the last Future Skills Wales project has been very helpful in planning the learning we provide in Wales."
According to the survey, 53 per cent of employers provided off-the-job training and the proportion of workers reporting barriers to training had dropped from 75 per cent in 1998 to 64 per cent in 2003.
More than two-thirds of employees said their bosses were good at managing people.
The survey results were revealed by first minister Rhodri Morgan, who said:
"We will not allow Wales to fall into a low-skills, low-pay trap.
"Skills are a route to stable employment, higher wages, long-term prosperity and increased well-being. "There are challenges and work to be done. The bulk of off-the-job training goes to managers. We must make sure our training systems are first class and geared up to meet the needs of employers."
He said the revised Skills and Employment Action plan would be published next year.
Sheila Drury, incoming chairman of ELWa, said: "I believe we need to create strategies that drive up demand from employers for higher skills to support higher value-added businesses."