Young people from disadvantaged backgrounds are abandoning valuable job training opportunities because of a little-known welfare “apprenticeship penalty” that can leave their families out of pocket by as much as £340 a week.

The problem is caused by benefit rules that classify a 16-year-old apprentice as an “independent worker” who no longer requires parental support. As a result, the parents’ child benefit and child and disability elements of universal credit are withdrawn.

Government advisers have warned ministers that parents are forcing children to drop out of apprenticeships once they realise the scale of the loss to household benefit income, and young people are turning down training schemes because it would impoverish their family.

By contrast, the family of a 16-year-old who opts to stay on in full-time education until 18 would see no reduction in benefit income, even if their child works part-time, as the child is regarded by the benefit system as a “qualifying young person”.

According to the social security advisory committee, the outdated benefit rules cause “documented harm”, distorting poorer children’s career decisions at the point where they must decide between education or training, and forcing some to decide between “the right pathway … and an affordable one”.

Stephen Brien, the committee chair, said: “This creates a real risk that decisions are driven by short‑term affordability rather than what is right for a young person’s long-term future.”

In one case, the committee said, a child was given an ultimatum by a parent to “quit the apprenticeship or leave the family home”. They chose the apprenticeship but could not afford to live independently and ended up leaving the job and moving back home.

Campaigners said the benefit system should be changed to remove the penalty. “No young person should have to choose between their future and their family’s ability to put food on the table,” said Lucy Schonegevel, of Action for Children.

Although the Department for Work and Pensions (DWP) said an apprentice wage – £257.98 a week – should offset the reduction in household benefit income, the committee says in practice it is unrealistic to assume a young person will hand over vast chunks of their wages to parents in this way.

At the lower end, a family with two working parents on the median wage with two children loses £17.25 a week in benefits. The same family type, but on low wages and claiming universal credit, would lose £95.48 a week.

A full-time working single parent on low income with one child would lose £225.49 a week. A single parent on low income with a disabled child would, after child disability elements are withdrawn, lose £339.92 a week.

The committee says the apprenticeship penalty is a factor in the rise in young people classified as “Neet” – not in education, employment or training. There are 957,000 Neets, and youth joblessness is at its highest for a decade.

It says the “unintended but severe” consequences of the penalty are caused by the DWP’s failure to adapt outdated benefit rules designed for a society where the school leaving age was 16, apprenticeship wages were higher, and the distinction between education and work was clear.

Laws introduced in 2013 require 16-year-olds to be in either education or recognised training until the age of 18. Both options are officially regarded as of equal value but in practice benefit rules do not align with this principle and penalise vocational choices, the committee says.

A DWP spokesperson said: “We are determined to reverse the 40% drop in young people starting apprenticeships over the last decade, and are carefully considering the report’s recommendations.

“With the apprentice minimum wage now at £8 per hour, a young person working 35 hours a week will earn around £270 a week and, as the report acknowledges, in most scenarios this offsets any reduction in household benefits.

“We’re determined to give every young person the best possible start in their career. That’s why we are investing £2.5bn to tackle youth unemployment, creating 50,000 additional apprenticeships for young people, and introducing a new incentive of up to £2,000 for SMEs which take on a 16- to 24-year-old apprentice.”

Andy McGowan, the policy and practice manager at Carers Trust, said: “It’s time for the benefits system to finally catch up. The system currently deepens pre-existing inequalities.”