UPDATED 6.08pm: A Salvation Army report calling on the Government to put the needs of young Kiwi workers ahead of migrant labour has sparked a testy debate in Parliament.

Labour Leader Andrew Little's locked horns with the Prime Minister on the issue this afternoon.

"What's more important to him? Providing cheap imported labour or providing a better future for young New Zealanders."

But John Key's accusing his opponent of having a double standard on the matter, citing Mr Little's comments at a Diwali event on the weekend where he supported Indian students.

"Trying to make out he's the friend of the migrant. When he's not bagging them for having a Chinese name, he's out there telling them Indian chefs aren't welcome in this country."

The Salvation Army is calling on industries such as the dairy and hospitality sector to employ New Zealand youth - as much as it does migrants.

It's report 'What's Next' has found New Zealand will be short 300,000 workers over the next 10 years and youth unemployment remains a key issue.

It also found a migration boom - on average 30 per cent more people are coming to New Zealand than three or four years ago.

Social policy analyst Alan Johnson said it's evident a conscious effort has been made to attract more migrant workers to fill the workforce gap.

But he said the Government's responded to calls for relaxed migration from industries such as the dairy and hospitality sector - over the needs of Kiwi youth to be upskilled.

He said there seem to be sector's that have received a lot of migrant labour - some of it labour that could have easily been taught to Kiwi youth in six months.

There are suggestions inequalities in our education system need to be addressed to fix the skill shortage in New Zealand's workforce.

The report found 75,000 people under 25 are unemployed mainly due to having limited - or no - marketable skills. It states it’s unacceptable that those figures have barely budged since the Global Financial crisis.

“Just prior to the GFC, the Labour force participation rate for 15 to 19 year olds was just under 56 per cent, but by mid 2013 the rate fell to less than 42 per cent and had only recovered to 46 per cent by mid 2016.”

It goes on to say if current job figures were applied against this higher participation rate of 56 percent, the youth unemployment rate would be over 30 percent, instead of the official rate of 20 per cent.

Mr Johnson said students leaving a decile eight, nine or 10 school are three and a half times more likely to have University Entrance.

He said it's not okay to accept such a large group have been marginalised and efforts need to be doubled, expectations set - to better the situation for youth, and the communities they live in.

Mr Johnson said it also found 900 people reach the age of 65 every week in New Zealand.

While it's a trend we've known about it's only just starting to bite and it's likely to continue for the next 15 years, said Mr Johnson.

The Salvation Army said while it's easy for students to move from school to university, there's a fragile disconnect between schools and a trade qualification.

Mr Johnson said it's in part because of an excessive focus on academic achievement, and an assumption that everyone should go to university.

He said whilst we shouldn't try and force people into trades because they aren't going to cut it at uni the reality is we are short of people with technical and practical skills.

Mr Johnson said only 35 to 40 per cent of people gaining apprenticeships are under 20.

However, Tertiary Education, Skills and Employment Minister Steven Joyce said the report was misleading. 

"Currently the percentage of 15-19 year olds not in employment, education and training (NEET) is almost the lowest level since records began in 2004.

"The report misleads in its use of youth unemployment rates as these only look at the relatively small percentage of youth that are in the workforce, which is why successive governments use the NEET measure.

"The suggestion that young Kiwis are being crowded out of the labour market is incorrect. In fact the economic settings of this government which include the migration settings, have helped create 323,000 additional jobs (or 15 per cent additional jobs across the workforce) since the peak of the global financial crisis in 2009."