The UK economy is being held back by a damaging disconnect between graduates and employers, with the changing values of young people and the organisational cultures that they encounter leading to a lack of understanding on both sides of the other's needs.
"Working Progress: How to reconnect young people and organisations", published by think-tank Demos and mobile telecoms operator Orange, argues that today's talented graduates feel out of place in organisations as companies struggle to motivate and support a generation of young people with higher debt, different values and expectations of a better work life balance.
But at the same time, graduates must develop a better understanding of the rapidly changing needs of their employers.
Based on data gathered from more than 500 graduates and 50 FT250 HR directors, the report argues that these changes pose new challenges for graduates, which increase the importance of 'intangible' personal qualities, such as the ability to work in a team or to be creative.
Meanwhile, employers need to be mindful of changing values and social norms and work on their cultural understanding of young people's needs and lifestyles to ensure that they retain their best and brightest recruits.
The report argues that this disconnect has emerged because of a series of rapid shifts in both the supply of jobs available from employers and the demand for jobs, or expectations of employment, on the part of graduates.
On the supply-side, the jobs available in the economy are changing, as is the nature of many organisations themselves. On the demand-side, the expectations and values of young people are shifting, alongside the changing nature of the graduate career itself.
"The current focus on qualifications and university places has diverted attention from the changing cultural values of young people," say the report's authors, Sarah Gillinson and Duncan O'Leary of Demos.
"While graduates need to improve softer skills, employers need to go back to school to learn what motivates their future recruits."
The research also suggests that this lack of understanding goes both ways Ė with graduates unclear about which skills employers are looking for.
Most obviously, while nine out of 10 graduates say they felt well prepared for the workplace, employers disagree, with half saying that it is harder to find graduates with the right skills Ė notably communication skills and problem-solving.
And while employers expect creativity and innovation to be the most important skill for graduates in ten years time, graduates only ranked this as eighth in their 'must-have' skills list
Employers themselves report that the biggest challenge for graduate employees was 'fitting into an organisational hierarchy', with four out of 10 saying they had problems in this area.
But for graduates, work-life balance emerges as a major area of difficulty, with four out of 10 reporting problems in their new job.
Disturbingly for employers, meanwhile, only a quarter of graduates expect to be in the same company in five years time.
Sir Digby Jones, Director General of the CBI, said that the report marked a departure away from the traditional skills-shortage debate.
"Understanding the personal and professional needs of today's university leavers is essential for the growth of British business, as we cannot expect employers to connect properly with graduates when they are speaking in different languages," he said.
"For too long the issue of the skills gap has been an exercise in finger-pointing and blame-avoidance. It is time to turn this around and create a positive sum game involving employers, government, the education system and of course the graduates themselves."
Alastair MacLeod, Vice President of Orange Business Services agreed, adding that the problem "is not so much a gap in skills as a gulf between cultures".
Among the recommendations made in the report to reconnect employers and young people is the suggestion that employers should treat work life balance as a skill, providing specialist training and monitoring progress as part of performance appraisals.
Moreover, they should also provide their recruits with advice and guidance on issues such as student debt and accommodation as well as putting in place mentoring schemes that recognise young people's tendency to form relationships and support networks with their peers.
At the same time, the report notes that today's narrow education curricula fails to develop creativity, entrepreneurial and initiative skills and suggests the establishment of "skills portfolios" accredited by the government that would measure young people's aptitudes in communication, team work, project management demonstrated through participation in practical projects.
For employers concerned about the retention of new graduates, the report proposes the establishment of co-operative networks between organisations which would offer recruits exchanges between member organisations and reflect the 'itchy feet' of graduates in the early part of their careers.
"The report shows that employers will benefit by going back to the classroom and reconnecting with young people by developing real working relationships with them," Alastair MacLeod added.
"Graduates in turn must develop a better understanding of the rapidly changing needs of their employers. We will then not only understand each other better, but will cultivate the social and creative skills our knowledge economy needs."