The Policy Exchange, which is a favourite of Conservative leader David Cameron, published its report as legislation to raise the age to 18 was debated in Parliament.
The author, former government advisor Professor Alison Wolf, said that faced with the prospect of inspections and penalty notices many small employers will simply stop hiring young people.
"The policy will almost certainly have a serious, negative impact on the job market for young people," she said.
"The large majority of young people are employed in the private sector, by small and medium sized companies who cannot afford to have employees disappearing on day release, or not available for sections of the day."
Wolf said raising the leaving age could cost £1.7bn a year, rather than the annual gains of £1.6bn predicted by the government.
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