As you walk into Brownhills, a small town outside Walsall, not far from Wolverhampton, you pass a 30-foot steel statue of a miner in a hard hat and overalls, holding a pickaxe and a lantern. He rises from the middle of a roundabout: you can see him from afar. He's known locally as Jigger - named after a miner, Jack "Jigger" Taylor, who died when the roof collapsed at the Walsall Wood pit in 1951. It is a monument to a distant time when Brownhills was a thriving mining town, before it was a steel town and before it became what it is now: a town in an area with one of the highest rates of unemployment among young people in Britain.

Today, more than one in five people between the ages of 16 and 24 who are looking for a job cannot find one. On the high street, a long strip of shops (Lidl, Tesco, Greggs, Nails 4 U, Value 4 Pound, Save-N-Save) is broken up by the squat Brownhills Excelsior Spiritualist Church; next to it is the jobcentre. Outside, leaning against the railings and listening to music, are Jade, 18, and Chrystal, 20. They laugh when I ask them how their job-hunt is going. "It's crap," Jade says. "There's nothing there." At college, she trained to be a nurse and Chrystal to be a mental health worker, but neither can find employment. Jade, who has been jobless for six months, comes to the jobcentre every two weeks to sign on and look for work.

The pair go wherever they can to ask for work. They travel by bus to Wolverhampton, Walsall and Birmingham. They go to shops and offices, dropping off their CVs, but people tell them that they are too young or that they don't have any experience. But they can't get experience because they can't get the work. I ask them why they think it is so tough here. "People come to our country and take our jobs," says Jade. "They're willing to work for less. I'm not willing to work for £3 an hour. Down the road at the carwash, you can't understand a word they say."

At the carwash, I meet Kris, a 29-year-old Romanian in a woolly hat who speaks good English and started working there a few days ago, washing cars to help out a friend. Before this, he worked in a bar in Wolverhampton. That's what he wants to return to: meeting people - and girls, he says with a smile. But he is grateful for the extra income.

Along the high street, I go into the sewing shop, the newsagent R Downes and Brownhills Appliances. When young people come in to ask for work, the shopkeepers can only shrug. As the man at Brownhills Appliances says, surrounded by rows of fridges in the deserted shop: "I don't know if there'll be a job for me soon." The two women in the sewing shop say that they're busy but not busy enough to take on extra staff. They watch groups of young people gathering at the bus stop outside and worry about what they're doing all day.

Robert Downes, who works in his news­agent with his father, who opened the shop in 1964, remembers Brownhills when it was a hub of the manufacturing trade. "Edward Rose, Super Alloys, Electrium." He reels off a list of defunct firms as if they were lost friends. Edward Rose, a car parts manufacturer, was the last to go. It closed its doors two years ago, he says.

The man I should speak to, everyone tells me, is Dougie Birch (or "Mr Brownhills", as the local Conservative MP, Richard Shepherd, calls him). Birch is 80 years old. He left school at 14, in 1944, and became an apprentice engineer at a local colliery. His entire working life was spent in the coal industry. When he was young, jobs were plentiful and the paths to work were clear: young men went straight to the pits or into the local factories and women went into retail; the brighter men went to technical college, while the brighter women enrolled at the commercial college to learn shorthand and typing.

After the mines were nationalised in 1947, training opportunities for young people in the industry were formalised. Birch spent four years as a mechanical engineering apprentice learning about maintenance, machine-work, hydraulics, pneumatics and pumps. He graduated and went straight into a job - employment was all but assured at the end of an apprenticeship - and worked his way through the system, ending up as a safety and training officer. In turn, he looked after a stream of apprentices. When they finished their years under his wing, he would push them into the world with a rallying cry: "I'd say to a youngster, 'Now you've got to learn the real thing. You've been taught the theory, the practical skills. You've got to apply it all to the field of work.'"

But, as the mining industry collapsed ("The writing was on the wall in the 1960s"), so did the jobs. By the mid-1970s, the Coal Board apprenticeships had been discontinued and, as the collieries, steelworks and foundries folded one by one, Birch says, the area became an "employment desert". He believes that, like other former industrial areas, the West Midlands has never quite recovered.

If Birch is the ambassador for an age gone by, then Chris, 24, is the young face of Brownhills. I meet him at a police office up the hill from the high street. He tells me that he feels nervous talking to new people and he struggles to look me in the eye. Chris is on a course run by the Prince's Trust, a 12-week programme for young people who are out of work. The trust tries to reach those who slip through the net and fall into long-term unemployment - mostly ex-offenders or those who left school early without qualifications.

Chris left school at 16 with a few GCSEs. "Gs and Es," he says, "not very good ones." Like Birch, he went straight to work, first for a company that exported lorries and machinery to the Far East, then in manufacturing, for a company called Midland Mouldings, at the local Coppice Side industrial estate. He worked there for nearly a year, making skirting boards, door frames and window boards. But when the recession hit, the jobs stopped coming in. "It was a small place," he says. "There were seven of us. Five of us got laid off."

Chris didn't lose hope immediately. At first, he spent all his time looking for work at the jobcentre and the library, scouring the local newspapers for anything that might suit him. He heard back from one in ten places he applied for and it was always a rejection. "After eight months of not getting anywhere, you start thinking, 'What's the point?' So I stayed in bed longer and longer."

There was little support around him: he lives at home with his mother ("I don't get on with her too well") and he stopped hanging around with his friends. They only made him feel worse, "because there was crime, drugs and all sorts, and I didn't want to associate with them".

Chris had nothing to do. He got into a bit of trouble with the police and felt his life starting to slip away. The police referred him to the Prince's Trust. He says that it has changed his life and given him a sense of purpose. Now, he wants to volunteer on the scheme to help other young people in the area. "Round Brownhills," he says, "there are probably more people that don't work than work."

In reality, the situation isn't quite so bad. In the ward, 5.1 per cent of working-age people claim Jobseeker's Allowance, compared to the national rate of 3.7 per cent. But these statistics tell only part of the story. Most of those who claim Jobseeker's Allowance are over 18, so the claimant count misses out many early school leavers who are unemployed.

The extent of the problem becomes clearer when you look at the youth unemployment rate (which covers the 16-24 age range) for the West Midlands. At 21.4 per cent, it is higher than the national youth unemployment rate, which is now 20.5 per cent (or 965,000 young people - the highest figure since comparable records began in 1992). Most experts agree that it will soon hit a million.

Chris Grayling, the minister for employment and Conservative MP for Epsom and Ewell in Surrey, dismisses the figure when we speak. He calls it "something of an illusion", as nearly 300,000 of the total are in full-time education - so it includes students looking for work in their holidays. But examine the statistics more closely and you will notice that the rise in the number of unemployed young people has been among those not in full-time education (which has gone up by 64,000 since last May).

Grayling blames his predecessors - he describes youth unemployment as a "crisis created by the Labour Party". The government's plans to combat this crisis will be grouped under the new "Work Programme" set out by the Department for Work and Pensions, which is dismantling and replacing several of the employment schemes initiated by Labour, inclu­ding the Future Jobs Fund. (There will be a worrying gap - the fund closes next month but the new programmes won't be fully operational until the summer.) Large private-sector firms such as Serco and G4S have been recruited as contractors to deliver the programmes. The reason why such companies are interested, says Oliver Gray, business development manager for the young people's charity Barnardo's, is the size of the contracts available. There's money to be made.

Gray is nervous about the change - Barnardo's was pushed out of the running to be a prime contractor and will now be subcontracted by the winning companies to deliver at a local level. The Work Programme will operate on a payment-by-results basis - money is paid for the number of people returned to work. During the negotiations, it became clear to Gray that many prime contractors are trying to pass that financial risk on to the smaller organisations, which will have to invest up front in the hope that they can deliver the results. Grayling insists this shouldn't be happening - the system, he says, has been designed to protect the "little guys". Yet, so far, that does not seem to be the case. "We're trying to negotiate the best deals we can," Gray says, "but if we're seen as difficult, they won't want to work with us."

Front-line organisations will also have to monitor a young person's engagement with a scheme - if clients don't comply with the requirements to look for work and turn up to training, they will have their benefits cut. This puts organisations such as Barnardo's which work with the most vulnerable young people in a difficult position. "One of the key benefits that we bring as an independent charity is that we're not the state - we don't have the power to punish people," Gray says. "We can build a different kind of relationship."

While Gray broadly recognises the need for sanctions, he worries about the damage that such measures would have on the children of single mothers, or on young people who are already below the poverty line. Grayling, however, defends the policy: "The only alternative is to say, 'Fine, it's OK to have your benefits but you don't have to do anything for them.' I don't think that is helpful."

If young people are lucky enough to find a job, it is often in the form of a placement or a short-term contract. Secure work is in limited supply. The government hopes to counter this with apprenticeships; it is creating 50,000 this year, although most of the extra funding is for those over the age of 19, which, again, misses out a large younger group. It is hardly enough to put a dent in the rapidly rising unemployment figures and Grayling can offer no guarantee that such a scheme will lead to permanent employment for any young person. "No government can guarantee that, because, unless it's taking on the people itself, it has no control over the recruitment market," he tells me.

This is the fundamental problem, Birch says. "Don't train people and fill them up with expectations if there isn't a job at the end of it." That's what Margaret Thatcher's Youth Training Scheme - which lasted for a year at first and was then extended to two - did in the 1980s, he says, and it was "soul-destroying".

Grayling remains optimistic, even though the data seems against him. "There's only one way of solving the unemployment problem properly and that is to create sustainable employment growth in a flourishing private sector." But, as the shadow employment minister, Stephen Timms, points out to me, the private sector is not creating jobs on anything like the scale needed. "It won't work if there's no work," he says.

Brownhills is a case in point - the flourishing private sector is hardly in evidence on a high street decorated with "To let" signs, where young people congregate outside the jobcentre.

Richard Shepherd has been the MP for Brown­hills since 1979, through the worst years after the mines closed. Unemployment reached 18 per cent under Thatcher in the mid-1980s. Now, he insists, things aren't as bad as they could be. He praises the resilience of the community and says that the likes of Walsall South and Walsall North, both neighbouring constituencies, are in a far worse state.

And yet Shepherd rues how Brownhills has changed. On Thursdays and Fridays, there is a market just off the high street. It was once the nucleus of local life. These days shoppers prefer the nearby retail parks in Cannock.

Few of the young people in Shepherd's constituency visit his surgeries, though he receives postbags full of letters deploring the rise in university tuition fees. He meets young people at schools and at prize-giving ceremonies, or through churches and family occasions. From these encounters, he says, "It looks as if the heart of England beats well." But these young people - at school and at church - are not Jade, or Chrystal, or Chris. They are the lucky few, the ones winning prizes. When I tell him about the young people I met through the Prince's Trust and the difficulties they have experienced in life and in work, he concedes that it is "a level, perhaps, I don't reach".

That's the point. There is outcry over the rate of graduate unemployment (20 per cent of the overall figure in the third quarter of 2010) but often young people in this group can rely on support from their parents. At the other end of the scale are those such as Chris - a young man with no support, who left school with few qualifications, and has been in trouble with the police and unemployed for months at a time. He is at the level that Shepherd doesn't reach. Here, the removal of the Education Maintenance Allowance for those aged between 16 and 18 from poor families will prevent many young people from staying in school or college. Here, it is easy to fall into long-term unemployment. Once you're in this territory, it marks your life. Experts call it the "wage scar" - a period of unemployment in your youth that can lead to a reduction in earnings of 23 per cent by the time you are 33 and having children of your own. It creates a generational disadvantage.

Most evenings, Chris says, he goes to his grandmother's house to cook her dinner, as she has been lonely since the death of her son, his uncle. In his spare time, he goes walking in the woods at Cannock Chase, usually alone. As he plays with the cuffs of his sweater, he says that he looks forward to leaving Brownhills.

“If I had kids, I wouldn't want to bring them up round here," he says. "I don't like the area. There's nothing to do here for young people. I've got to get out."

I ask Birch, Mr Brownhills himself, what advice he would give a young person in the town today who was searching for work. "I would tell youngsters to get as many craft skills under their belt as they can, whether it is painting and decorating or road mending. I don't know." He pauses, and then says: "There's always a need for a DIY man."

Sophie Elmhirst is an assistant editor of the New Statesman