The report estimates that the exodus of 227,000 young adults - a surprisingly high figure - costs Britain Pounds 350 million a year through benefits payments and crime. The Training and Enterprise Councils for England and Wales report adds that the cost almost equals the price of an education and training rescue package.
The linking of crime, poverty and disaffection will embarrass Government ministers who have repeatedly denied a connection.
The inquiry is the first attempt by an official body to track the numbers of disaffected school-leavers slipping through the training net. The report, commissioned by the TEC National Council equal opportunities support group, calls for a clear strategy of further education and training.
A spokesman for the group told The TES: "A large number are early school leavers without qualifications and are characterised as lacking basic skills and having low self-esteem. They are at increased risk of homelessness, drug problems and offending behaviour."
One in two African Caribbean young people are dropping out, the report adds. It says that 18 to 20-year-olds make up 5 per cent of the workforce, 12 per cent of the unemployed and 19 per cent of the long-term unemployed.
The report urges Government action and financial support to remove "barriers" to training. Early intervention is also recommended to combat disaffection.
The TECs accept some blame in the report and stress the need to work with statutory and voluntary agencies to give more support so, helping the excluded groups to join the workforce. But many TECs are annoyed by repeated Government cuts to their budgets for the unemployed.
New basic skills training and pre-vocational schemes being piloted by TECs and voluntary agencies show that better training and more relevant qualifications for 16 to 19-year-olds curb drop-out rates.
Some of the answers may be found in the Dearing review of 16-19 qualifications, leaked to The TES this week. It calls for "real jobs", that is high quality education and on-the-job training leading to a recognised qualification for the 67,000 youngsters on low status youth training.
Sir Ron calls for youth training to follow the Modern Apprenticeship model. Modern Apprenticeship schemes were launched last year with the aim of recruiting up 60,000 school-leavers to high-quality training by the summer. Prospects currently look bleak as only 15,000 have been recruited and ministers are understood to want a revamp.
His final draft report includes a national framework for all qualifications and redesigned National Record of Achievement covering a much wider range of successes than mere school or college qualifications.
Researchers at the Henley Management Centre say the number of 18 to 20-year-olds on benefits could be cut by 150,000 immediately by diverting social security cash to Training for Work schemes.
Community service schemes run by voluntary groups, TECs and colleges - based on already successful pilots - would cost an estimated Pounds 365,000 and similarly take 150,000 off benefits.