Speaking at a Westminster Employment Forum event on preparing young people for work, chaired by HR magazine deputy editor Katie Jacobs, Davis said a lack of entry-level jobs is hampering people looking to get into work for the first time.
He added that when entry-level jobs are available, companies are not using the right tools to reach young people.
"We asked businesses why they didn't recruit young people for jobs," he said. "Two-thirds said that none had applied for the jobs they advertised. But the reason they hadn't applied is because they didn't know about the jobs."
He added: "A lot of large recruitment programmes are transactional and that doesn't favour young people."
David Pollard, chairman for education, skills and business support for the Federation of Small Businesses, pointed to research the body has conducted that suggests smaller businesses are unsure how to attract younger candidates.
"When asked how confident they are about attracting certain groups, 28% said they are confident about recruiting graduates," he said. "This drops to 20% for college leavers and 8% for school leavers."
Nick Chambers, director at the Education and Employers Taskforce, said that people have "more options than ever" when leaving education, but this can be counterproductive.
"With so much choice, it's easy to get confused," he said. "Instead of actively looking to connect with the employment market, young people can get lost. It's very easy to end up NEET in this way if you're not very careful."