Employers who give apprenticeships or traineeships to young unemployed people will be paid the equivalent of the dole for a year.
The new scheme, launched today by Prime Minister Jacinda Ardern, will also pay the employers $3000 to $6000 each for pastoral care of the young people.
It will start with 150 young people aged 18 to 24 who have been on a benefit for at least six months, and will be funded for up to 4000 people with the same criteria from the middle of next year.
Employers will be required to top up the young people's wages to the minimum wage and help them to achieve a Level 4 qualification such as an apprenticeship.
The "Mana in Mahi – Strength in Work" scheme will cost $12 million to $24m for the pastoral care subsidies. The cost of the dole is not counted on the basis that taxpayers would have had to pay that anyway if the trainees had remained unemployed.
The full cost, including the dole, was put at $60m when former Labour leader Andrew Little announced it in 2016.
"Mana in Mahi is all about supporting our young people," Ardern said.
"We'll help them earn an apprenticeship or other qualification so they can get on the pathway to life-long work. It's a win-win – they get off the benefit and enjoy the dignity of work while encouraging employers to take on apprentices they might otherwise not have trained.
"We know these young people are dealing with many challenges in their daily lives that most of us don't have to deal with. That's why we're also investing in pastoral care to make sure they get the support they need to keep learning and earning, and to ease the pressure on employers.
"Mana in Mahi is another step in our broader plan of supporting young people into training and apprenticeships and dealing with skills shortages. Our fees-free policy provides two years of support for apprenticeship training and is helping thousands of students get qualifications already."
Employment Minister Willie Jackson said the Government was committed to supporting people to get the skills they needed and at the same time address skill shortages.
"The current unemployment rate is relatively low at 4.5 per cent but there is still work to do for young people," he said.
"Eleven per cent of 15-24 year olds are NEETS – Not in Employment, Education or Training – and it's around 15 per cent for Māori and Pacific people. That's not good enough."
The programme will be rolled out in phases, with the first involving two employer groups and initially about 40 places ready to go in October with 150 places expected to be filled next year.
National Party deputy leader Paula Bennett said unemployed young people who refused to join the scheme should be penalised.
"National supports efforts to get hard-to-reach young people into work but believes they must also be held accountable for that extra support and to get their lives on track," she said.
"For example, will there be repercussions for young people who refuse to take up the scheme or who start it then fail to continue? Will they be able to go straight back onto welfare?
"What about for those who repeatedly fail to turn up and what sort of checks will be in place to ensure they do?
"This Government is already removing fair sanctions for beneficiaries who fail to meet reasonable obligations and that's not fair to those who need more support or to taxpayers."
Industry Training Federation chief executive Josh Williams said support should be extended to all employers of new apprentices, not just those who took on long-term jobseekers.
"While we heavily subsidise young people who undertake tertiary study, we also need to support employers who train people in the workforce, especially new trainees or apprentices, or those who require additional pastoral support," he said.
"While 'Mana in Mahi' is a good start, it is too cautious given the scale of our skills problem in New Zealand. If we don't get more young people on a track to a working future we will all pay much more in the long run."