Hancock was speaking yesterday at an event organised by entrepreneurial college provider, Gazelle, which looked at how further education colleges could work with employers, LEPs and the wider sector.
Hancock said even though skills shortages have been around throughout many "boom and bust" years, they were again "starting to rear their ugly head" and were "unacceptable".
He said dealing with these problems is the "number one motivating factor" in his job.
"Skills shortages and high unemployment tell me the whole education system isn't working and hasn't been working for a long time," Hancock said.
"We need to make sure we have an education system that ensures all students reach their potential.
"In these uncertain times we need to start equipping young people with the qualities and skills they need to succeed in employmen: skills such as self-reliance, self-confidence and courage - real deep meaningful values."
He added: "But the responsibility absolutely lies with both Government and employer."
Also speaking at the event was director-general of the CBI, John Cridland, who said he wanted to create a "better deal for employers". He said: "Most CBI members are passionate about skills and young people but are put off by the current system.
"It's an alphabet soup of confusing initiatives."
Cridland believed one way to tackle the problem of skills shortages and youth unemployment was through apprenticeships and praised what had been done by British businesses over the past two years, calling it "phenomenal".
Research published today from the Office of National Statistics (ONS) shows a record number of young people in insecure jobs with no guarantee of regular hours or regular pay.
Figures from the ONS show the number of 16-to 24-year-olds on "zero hours contracts" has more than doubled since the start of the economic downturn.
