Young people are more likely to have their out-of-work benefits reduced or stopped for breaking the rules than any other age group, according to a new report.
The Policy Exchange think tank said the Government must overhaul the benefits system to help better engage young people in seeking employment.
It said official Government data shows people aged 16 to 25 account for over a third (35%) of total sanctions but make up less than a fifth (17%) of total Jobseeker's Allowance claimants.
Sanctions can be handed out for failing to apply for or accept a job, failing to actively seek work and failing to attend a training or employment scheme.
In its report, Welfare, Work and Young People, it called for a small number of specialist Youth Employment Centres to be created out of existing Jobcentres to tackle the problem.
Steve Hughes, author of the report, said: "All the evidence shows that being in work at a young age has a strong bearing on employment later in life.
"That is why the Government should look at changing the way benefits are paid and employment advice is offered to people aged under 25 who are not in work and education.
"A dedicated Jobcentre will intensify the level of employment support and advice offered to younger generations during a critical stage of their lives."
The centres could help young people find work, an apprenticeship or go back to education and would be able to target the skills needs of the local area.
The centres would also change the way sanctions are applied, including abolishing financial penalties for low level breaches, and introduce new rules such as requiring claimants to volunteer.
A Department for Work and Pensions spokeswoman said: "Youth unemployment is down by more than 300,000 since 2010. But there's more to do.
"Our Jobcentre Plus support for schools initiative will provide pupils and their parents with advice on the best routes into work experience, traineeships and apprenticeships.
"We are committed to getting more young people into work and sanctions are only ever used as a last resort for the small percentage of people who don't take up help."