The Activity Agreements scheme, which rewards young people with a weekly allowance of up to £30, was only taken up by a fifth of young people not in education, employment or training (Neet), who were the "easiest to reach".
Although the research found that financial incentives do encourage young Neets back into education or training, the pilot was not flexible enough to meet the needs of the most disengaged young people.
The pilot was delayed in a number of local areas and the scheme had some problems retaining staff, which meant staff were unable to recruit as many Neets as initially planned.
Activity Agreements were piloted in eight Connexions Partnerships areas between April 2006 and March 2008. The pilots have been extended for a further 18 months. A DCSF spokesman said the extended pilots would test new ways to re-engange the most vulnerable young people.
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