A working group set up to review long-term welfare dependency is looking at radical changes to the school system for about 4000 youngsters not cut out for traditional academic learning.

The group, chaired by economist Paula Rebstock, will canvass changes in education, health and the benefit system in a report on reform options to be released today.

"We talk about the schooling system and the importance of acknowledging the school system does really well for the average student, but there is a group that seems to drop out of the school system at several transition points," Ms Rebstock said yesterday.

"They make up the 4000 kids who are not in education, training or employment. We know they tend to stay on a benefit for a long time - if they start off in that situation in their mid-teens they tend to be still on a benefit in their mid-twenties.

"We will talk about how to think about options to keep them engaged in formal learning, probably bringing alongside that access to other types of learning as well.

"We'll discuss what sorts of things might allow that to happen more quickly, including developing a system where the funding follows the student."

Today's report, the group's second of three, will be open for submissions until Christmas. Final recommendations are due in February.

Ms Rebstock said the report would focus on youth because the small group who went on the Independent Youth Benefit aged 16 or 17 "become a fairly large number as they get older".

Teenage beneficiaries have to show they are not being supported by their parents because of to a family breakdown.

Ms Rebstock said they should have "access to appropriate forms of education and the need for pastoral care".

"There is pretty good international evidence to suggest that with the under-18 group, pastoral care is part of the recipe for success."

The group will also recommend more support for teen parents. New Zealand's 20 teen parent education units cater for only 500 teenagers, a fraction of the 4721 births to teenage mothers in the year to March.

Ms Rebstock hinted the group was unlikely to recommend a shift from a tax-based welfare system to a European-style contributory insurance system, but would look at "what lessons we can learn from insurance".

"The aspect we are most interested in is thinking about an insurance approach - looking at the lifetime cost of an incident, in this case a spell on the benefit," she said.

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