An “anxious generation” of young people is struggling to adapt to the outdated world of work, according to the government’s jobs adviser.

Alan Milburn, a former Labour health secretary, will say this week in a report that businesses must adapt by offering more flexibility and mental health support for young people to stave off an “economic catastrophe.”

In November last year, Milburn, who served in various government roles under Tony Blair, was asked by prime minister Keir Starmer to examine why almost 1 million 16 to 24-year-olds – about one in eight – are not in education, employment or training.

His interim report on this cohort – often known as Neets – will be published next week. According to the Times, it will say that “a rising tide of mental ill-health, anxiety, depression [and] neurodiversity” is a central driver of high economic inactivity among young people.

The review is also expected to address the rising influence of social media on the mental health of young adults, with Milburn asserting that their brains have been “rewired” by smartphones.

“The system is trapping people in worklessness rather than enabling them into work,” Milburn told The Times. “We’re at a risk of just writing a whole generation off.

“This is a bedroom generation. They are sort of living in their bedrooms. They are on all the time, they’re never off. [Social media] is leading to some evidence of functional impairment, changing their sleep patterns, concentration levels. That is having an impact on their ability to work.

“They are not snowflakes. People say it’s a soft generation. My view unequivocally is that it isn’t. It is an anxious generation.”

More than half of the UK’s 946,000 Neets have never worked, and a quarter are classed as unable to work due to a long-term sickness or disability. Of these, 43% say that mental health problems are the primary reason they are unable to work, up from 24% in 2011.

The government said last year that the proportion of Neets in the UK is significantly higher than in many other developed countries.

The country has about double the number of Neets as Japan or Ireland, and three times as many as the Netherlands. Unemployment under the age of 23 has been linked to lower wages even two decades later.

Milburn’s report will say: “[Young people] are different, not worse, not lazier, not less intelligent. They have grown up in a digital world that has rewired how they communicate, form relationships and manage stress. They have fewer experiences of workplaces and they present with higher levels of anxiety and depression.”

Milburn is expected to argue that Neets could present a solution for British businesses who are struggling to find skilled labour amid falling immigration. Figures released on Thursday showed that net migration to the UK dropped to 171,000 last year, compared with a peak of 891,00 in 2022.

In an interview with the Guardian earlier this week, Peter Hyman, a former headteacher and adviser to Tony Blair and Keir Starmer, said schools were becoming a “pipeline” to worklessness and called on the government to enact radical change, including a social media ban.