The next time a government minister rhapsodises about aspiration, allow yourself a long, cold laugh. The Tories are "the party of aspiration and opportunity", says David Cameron. Michael Gove wants us to be an "aspiration nation". "Aspiration, ambition, hope, optimism are always important," offers Nick Clegg, "but especially important in the teenage years." And all the time, at the risk of sounding impolite, the very idea shrivels to nothing.

This week marked the point at which youth unemployment became the subject of something close to moral panic, while the "A" word surely took on the ring of a sick joke. The "lost generation" will soon be one of those cliches so often parroted that it loses its meaning.

The basics, we all know – over 1 million under-25s are now out of work, and the means by which they might be helped have been cruelly hacked back.

Labour's Future Jobs Fund is now a memory; the Connexions careers service has been savaged. And by way of replacements? On Wednesday, presumably mindful of the fact that thousands of "apprenticeships" have simply amounted to modest retraining packages for existing employees, the ever-stoic Vince Cable unveiled a new £1,500 "incentive payment" aimed at convincing firms to hire trainees. But at most, it will benefit a measly 20,000 young people. The next day Cameron announced a £250m "funding pot" to encourage businesses to create new training programmes, but nobody should be rejoicing: the money will be diverted from "colleges and other training providers".

To spend time fussing over these sticking plasters risks ignoring the central point: in a climate like this, such remedies are for the birds, and for as long as confidence and demand are in such a parlous state, the young unemployed will have little cause for hope.

So, another question. If you're lucky enough to get a job, what happens? If you are young and unemployed, the work you are most likely to be offered will be located somewhere in the great unstable netherworld that defines an increasing share of the British economy: casual, part-time, agency-based, often based on self-employment and commission rather than a wage, devoid of prospects. People between 16 and 24 are twice as likely as the rest of the workforce to be in involuntary part-time or temporary jobs. Following on from a piece I wrote in August, the Guardian this week reported that ever-increasing numbers dragooned into "work experience" for such chains as Poundland, Asda and Tesco are not even paid. As evidenced by rising Tory noise about deregulation of the labour market in advance of George Osborne's growth review, this is the only way the political right knows how to push things. Witness this week's call by the Tory MP Dominic Raab to show the nation's youth the wonders of aspiration by scrapping the minimum wage for under-21s.

"Temporary work gives you an idea of the kind of career you might want, looks good on your CV and also gives you something to talk about in job interviews," reckons the employment minister, Chris Grayling. Perhaps, but once you're in the midst of the flimsiest part of the economy, even if you're brimming with ambition, you may find it hard to escape. Employers, after all, will often glimpse a long period of intermittent, low-end work on a CV and assume it speaks volumes about an applicant. Then again, what else is there? This is what a largely deindustrialised country, faced with shrinking export markets, has to offer: fragile employment in the sectors – supermarkets are the best example – that are largely immune to even a prolonged slump.

Now, consider what the government is doing to ensure those currently in education enter such a vexing labour market in the best possible shape. The iniquitous turn in higher education policy barely needs mentioning. The educational maintenance allowance has gone, killed by a mixture of deficit zealotry and the Tory belief that for the state to help someone stay in education represents profligate nannying (as a recent book written by four hotly tipped Conservative backbenchers puts it, "People should not be bribed to attend school or university but feel it is a privilege"). Moreover, between now and 2015, while student numbers increase thanks to the mandatory educational participation age rising to 18, funding for the education of 16- to 18-year-olds will be cut by 15.8% – in real terms, closer to 20%.

On the ground, this is what all that means. This from the head of Telford College of Arts and Technology, in Shropshire: "Reductions in funding will reduce the ability of the college to increase the skill levels of our young people and in turn will reduce their ability to lead productive and prosperous lives in the future." A college principal in Sunderland has announced the end of a high achievers scheme that helped kids from disadvantaged backgrounds with university applications.

What's that sound? More and more young people failing to make the grade and falling into unemployment or low-end non-jobs. Whither Gove's "aspiration nation"? I have been re-reading one of 2011's most insightful books, The Precariat: The New Dangerous Class, by the British academic Guy Standing. Its title refers to the growing section of the labour market into which young people are being shoved, and equates it with what Standing calls the four As: "anger, anomie, anxiety and alienation". He argues that an ever more precarious labour market will increasingly shred people's belief in commitment, reciprocity, and long-term thinking.

One of his most sobering analyses of his subject runs thus: "There is no shadow of the future hanging over their actions, to give them a sense that what they say, do or feel today will have a strong or binding effect on their longer-term relationships. The precariat knows there is no shadow of the future, as there is no future in what they are doing." Tories, take note: if there is indeed a mounting crisis of respect and morality, not least among the young, it may have less to do with such odorous old tropes as "trendy teaching" than a labour market that corrodes such values at speed.

All this also shines light on our economy, and its very uncertain prospects. As our vulnerability to the crash conclusively proved, there is no convincing future in a service-dominated, low-skills way of doing things – let alone the same kind of economy even further crowded with undereducated young casualties of the cuts. Every successive government wrings its hands about the skills gap and our failure to compete internationally, but soon enough, any hope of improvement will have gone. A lost generation? A lost Britain, at this rate.

• This article was amended on Friday 18 November. The original said that 991,000 under-25s are out of work. This has been corrected