The employers' body, IBEC, has called on the Government to adopt a strategy to ensure that all young people remain in full-time education or training until the age of 18.
It is also demanding "a channelling of resources to schools in disadvantaged areas in order to help break the cycle of disadvantage through education".
"Research shows that education systems with higher school leaving ages succeed in keeping more young people at school until the end of upper secondary education," said Mr Padraig O'Grady, IBEC's assistant director for social policy, yesterday.
The statement from the employers' body reflects the concern felt by industry at the growing skills shortages in many sectors of the economy, and the realisation that more people from disadvantaged backgrounds will have to be trained to fill them.
Mr O'Grady said IBEC would like to see the age for leaving compulsory education and training raised to 18.
Legislation raising the current school leaving age of 15 to 16, to bring it into line with most other EU countries, has been promised by the Minister for Education and Science later this year.
IBEC is particularly worried about the introduction of the minimum wage in April 2000. It believes this could "entice young people out of the education system".
He said early school leaving meant that the State's skilled workforce was already losing 20,000 young people every year.
Mr O'Grady said 10 per cent of primary schoolchildren in disadvantaged areas were "failing to reach fundamental literacy level, i.e. they are unable to understand a tabloid newspaper and read or fill in basic forms". "This results in unacceptably large numbers of students leaving school every year with little or no qualifications to speak of.
"Last year, 13,000 or 20 per cent of the student cohort dropped out of our second-level system. Many of these young people will run the risk of being unemployed in the future."
The situation was "further compounded in that approximately 6,000 more students, i.e. one in 10 sitting the Leaving Cert, fail to get five D3s at any level".
He said the education system should ensure that all young people should have an opportunity to participate in the State's future as a "high skill, high innovation economy".
"The percentage of third-level entry from some schools is as high as 90 per cent, while other schools have a drop-out rate of 60 per cent by the age of 15. Low educational attainment has increasingly damaging consequences for the individual and society as it can consign people to long-term unemployment and undermine social cohesion," said Mr O'Grady.
He pointed out that the issues of failure rates, under-achievement and early school leaving were best addressed earlier rather than later in a child's education, and such early intervention was also more cost effective.
"Prompt action must be taken to prevent students at risk of underachievement from continuing unchecked on the path to failure," he said.