Youth unemployment now stands at 943,000
Young people who are unemployed for six months will be guaranteed work or training, Chancellor Alistair Darling, has announced.
The scheme, which will begin next month, was unveiled as part of his pre-Budget speech in the commons.
Currently only those under 24 years old who have been unemployed for a year qualify for the help.
The chancellor hopes to raise £550m - from a 50% tax on bankers bonuses above £25,000 - to help ease unemployment.
Work and Pensions Secretary Yvette Cooper said youth unemployment remained a major government concern.
"The longer young people are unemployed the harder it can be for them and that's why we are investing this extra help. The £5bn investment we have already set out is making a real difference."
Youth unemployment, measuring the number of 16 to 24-year-olds out of work, now stands at 943,000.
However, more than a quarter of 16 to 24-year-olds classed as unemployed are actually in full-time education; they are counted as unemployed if they look for as little as one hour's work a week or if they say they would leave education if they found employment.
The true nature of unemployment within this group is further blurred as the vast majority of 16 and 17 year olds find it hard to claim Jobseeker's Allowance, and therefore do not show on claimant count figures.
Youth charity The Prince's Trust was encouraged by the announcement.
"Young people leaving school at 16 are struggling to find work more than ever, as unemployed graduates flood the jobs market. We welcome the Government's support, to ensure that these young people avoid a bleak, jobless future, " a spokesman said.
The Work Foundation praised the government for their efforts.
"Keeping young people in touch with the labour market is the right thing to do in these challenging times," it said.
However, pressure group Youth Fight for Jobs is worried the scheme could lead to young people being exploited.
"There is nothing to suggest that the offer of work or training will constitute real jobs and training schemes that are not tools of exploitation used by the bosses and local authorities to use young people as cheap labour or force them to work for free, " said spokesman Sean Figg.