This paper investigates to what extent the likelihood of young people being long-term NEET can be explained by low literacy skills, how this varies across advanced countries, and how this cross-national variation can be explained by education and social policies. We use PIAAC data and include macro-level indicators on education and social policies. We analyze the likelihood of being long-term NEET versus being in employment or in education/training among some 34,000 young people aged 20–30 from 25 countries. We find that low-literate young people are more likely to be long-term NEET. While NEET risks are associated with countries’ institutional characteristics, this does not mean that these characteristics and policies always work in favour of low-literate young people. Although high levels of (enabling) ALMP generally reduce the risk of being NEET, they do so less for low-literate young people. Additionally, young people living in social-democratic welfare states are less likely to be NEET, but low-literate young people seem to profit less from this.