Hundreds of thousands of young people are doing vocational courses which do not lead to university or a job, a report says.
A review commissioned by ministers recommends a radical shake-up of vocational education in England.
It says all pupils should study a core of academic subjects until they are 16.
And it calls for changes to the school league tables so some vocational qualifications are not counted.
At the moment, some qualifications count for the equivalent of four GCSEs.
The report says this, coupled with the funding arrangements, provide "perverse incentives" for students to be steered in to notching up strings of qualifications which may not help them in to work or higher education.
And this is at a time when young people are facing a very difficult labour market, it says.
The review has been carried out by Professor Alison Wolf, an expert in education and skills.
'Low-level courses'
Her report says: "The staple offer for between a quarter and a third of the post-16 cohort is a diet of low-level vocational qualifications, most of which have little to no labour market value.
"Among 16 to 19 year olds, the review estimates that at least 350,000 get little to no benefit from the post-16 education system."
Her report says the current funding system encourages colleges to put students through a lot of qualifications - but not to continue to improve their core skills in English and maths if these are lacking.
It calls for changes to the system of funding and regulation, longer-term work placements for older pupils and greater involvement of business and industry.
At the same time, schools should no longer have a duty to provide work-related learning, including work experience, to all pupils over 14.
Prof Wolf says funding for pupils aged between 16 and 19 should be per student - not per qualification - as it is at the moment.
She believes children should study mainly academic subjects until they are 16 and that if they do not get a good GCSE in English and maths by that age, they should be made to continue with those subjects.
"We've got more than half our 15-16 year olds failing to get good maths and good English at GCSE the first time round and two years later it's no better," Prof Wolf told the BBC.
Until 16, she says, pupils should spend 80% of their time on core subjects.
'Little hope'
Education Secretary Michael Gove said the government would reform the system: "The system that we have inherited is very damaging. It is unfair for children and it is harming the economy.
"Millions of children have been misled into pursuing courses which offer little hope."
He said high-quality vocational courses were "immensely valuable", giving access to "great education and great jobs", and should be available to all children.
"We will reform league tables, the funding system, and regulation to give children honest information and access to the right courses," he said.
The Wolf report calls for more high-quality apprenticeships for young people aged from 16 to 18.
Employers should be part-subsidised to offer such apprenticeships, Prof Wolf believes, if they offer wider training.
The report also says it should be made easier for teachers from further education colleges to teach in schools and that colleges should be allowed to take pupils from the age of 14.
The government is already planning to open new University Technical Colleges, where pupils could go from the age of 14 to do work-based training and core academic lessons in English and maths.
Vocational qualifications taken in schools and colleges include Btecs, City and Guilds and OCR Nationals, and cover subjects ranging from IT and construction skills, to dance, hospitality and catering.
Value
The bodies which provide them say they are keen to work with the government to implement the findings of the review.
A spokeswoman for Pearson, which provides the Btec qualification, said: "We were clear in our submission to Professor Wolf that we believe that any qualifications a young person takes must help them to progress in their lives.
"Research indicates that the value of our qualifications, like the Btec, is very strong in this respect.
"We welcome the moves to improve collaboration between schools, FE and employers to enable more learners to experience this."
OCR said it wholeheartedly supported the findings of the Wolf review. A spokeswoman said: "The recommendations safeguard the interests of young people with measures that can support real progression, raise the quality of vocational provision and, crucially, secure core achievements in English and maths".
Martin Doel, the chief executive of the Association of Colleges, said the difficulties facing young people in today's labour market were not a reflection of the quality of vocational education per se, but were related to the state of the economy and "the challenges colleges and others face in picking up the pieces where pupils leave school with few or no qualifications".
He said: "We welcome Professor Wolf's recommendation that colleges can play a leading role in vocational education for students from the age of 14 and the recognition that lecturers in colleges have much expertise to offer young people."
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