The nation's vast secondary education system, which includes more than 14 million high school age youngsters, fosters a process of "compulsory youth" and urgently needs a sweeping overhaul, according to a major education study released yesterday.

The Carnegie Council on Policy Studies in Higher Education said that because of deficts in the present public high school system "about one third, of our youth are ill-educated, ill-employed and ill-equipped to make their way in American society."

To solve those problems the council recomended fundamental changes in the structure of high schools, making them smaller and breaking up rigid five-day attendance schedules into a system that would allow one or two days each week of education-related work or service.

In addition, the council called for an end to compulsory education for those over 16 and a transfer of technical skills programs out of high schools into the workplace or to "skills centers" set up in community colleges and other institutions of higher education.

The council also recommended the retention of the voluntary military service system and an end to Social Security payments by workers under 21.

Council Chairman Clark Kerr said the overall rate of high school dropouts has reached 23 percent, going to 35 percent for blacks and 45 percent for Hispanics.

"We must find ways to break up the big monolithic high school and its deadly weekly routine," said Kerr, former president of the University of California. "High school is an alienating experience for many young people [and] like a prison -- albeit with open doors -- for some," he said.

In its study, the Carnegie group recommended that high schools teach skills -- "literacy and numeracy, and good work habits" -- in "three effectively used days per week."

The council, established in 1967 as the Carnegie Commission on Higher Education, has been influential through its studies in determining changes in the U.S. college system. Its recommendations, for example, helped to expand broadly the system of two-year community colleges in the United States, particularly in urban centers.

In its study, released yesterday, titled "Giving Youth a Better Chance," the council said the nation's youth problem would not disappear without a basic change in the secondary education system.

It noted that an estimated 20 percent of those youths who remain in high school are deficient in language and number skills. The study said that high schools fail to provide an adequate transition into permanent jobs.

Chronic truants and dropouts, especially in inner-city areas, are a "lost generation," the study said.