The LGA claims that if the central Government does not work more closely with local authorities on skills and training, young people aged 16-24 years will suffer higher underemployment than any other generation.
The number of young people who are currently either unemployed or in part-time work is about one in five. In the worst affected areas, such as Sheffield and Newcastle, this figure is almost 50%.
There are currently 2.46 million young people in the UK classed as 'hidden talent'. This includes people who are either unemployed, in part-time work or working in roles they are overqualified for. This is up by 738,000 from 2005 and accounts for 40% of the potential young workforce.
O2 HR director Ann Pickering told HR magazine the disconnect between this potential workforce and employers is contributing to the skills shortage in the UK, especially in the digital space.
"The LGA is right to refer to hidden talent. As the first generation to have grown up with the internet, young people naturally possess the digital skills and capabilities that many other workers simply don’t," Pickering said.
Pickering added that these skills mean young people could help solve the skills shortage if organisations understand the way to engage and attract them.
As well as the LGA's call for local authorities to be more involved in training, Pickering said employers need to take more responsibility.
"Our own research shows that 750,000 additional digitally-skilled workers will be needed to meet the rising demand from employers over the next 5 years," she said.
"Businesses of all sizes need to step up now, and take responsibility for nurturing, harnessing and encouraging the potential of these young people."