More than half of employers say school leavers often cannot function in the workplace due to a lack of basic maths and literacy, a survey suggests.
GCSE results are being released later this week
But the poll of 507 firms for business leaders the CBI also suggested youngsters' IT skills can give them the edge over their bosses in this area.
The CBI survey found many were having to retrain school leavers in the basics they should have learned in class.
Last year 53% in England achieved less than grade C English and maths GCSEs.
The report comes days before this year's GCSE results are published.
New figures from the 2007 CBI/Pertemps Employment Trends survey suggest 52% of employers are dissatisfied with the basic literacy of school leavers, 59% with their basic numeracy.
But some 92% say youngsters' IT skills - in increasingly technology-driven workplaces - are acceptable.
CBI director general Richard Lambert said: "Their fluency with iPods, mobiles and MySpace has translated well into the workplace, and often gives them an edge over their bosses."
But he went on: "The challenge ahead is for schools to channel that same enthusiasm into numeracy and literacy skills, where far too many young people are struggling.
"Basic literacy and numeracy problems are a nightmare for business and for individuals, so we have to get these essentials right."
Mr Lambert added: "Maths and English skills are a vital bedrock for further learning, and are essential both in the workplace and in life."
"We have to sharpen the skills of more of our young people, so that they are starting from the strongest possible position."
The CBI survey suggested 86% of employers think improving maths and English skills should be the government's top priority.
Some 15% offered remedial training in maths and 13% trained staff in basic literacy.
Mr Lambert suggested that the cost of not turning the UK's workforce into a highly skilled one would be "grave".
This is because Britain would never be able to match the labour costs of China, India and emerging economies, he argues.
The CBI acknowledges that progress has been made but argues that it is "nowhere near enough".
Skills Secretary John Denham said the government was taking steps to make sure young people were equipped for the job market.
"The Labour market has changed. Thirty years ago most people could go to employers without these skills and there were jobs for them," Mr Denham said.
"Today, the same employers require them to have functional literacy and numeracy, they require them to have computer skills.
"We've got to make sure that they have those."
In 2005, the then education secretary Ruth Kelly said pupils would have to pass tests in "functional" literacy and numeracy.
English and maths GCSEs are being changed to fulfil this pledge.
The leader of the NASUWT teachers' union, Chris Keates, said the CBI was "the arch serial detractor of educational achievement".
"It would have everyone believe that there was a golden era in the past when everyone left school highly literate and numerate. This is simply not the case."
Progress in raising standards in English and maths over the last 10 years had been remarkable and the CBI would do better to remind its members to invest more in training, she said.