The Social Security (Extension of Young Persons Services and Remedial Matters) Amendment Bill has passed its first reading by 105 votes to 10.
Labour MP Sue Moroney said the party supported the bill to the select committee stage, where she expected "serious reservations" to be examined.
"The part that we are very concerned about ... is the idea that they are going to be put through some kind of risk-rating process fills me with dread."
Ms Moroney said risk-rating approaches in other areas of government such as in the setting of ACC levies on motor vehicles had been shambolic.
"If they can get it so wrong with something that is relatively straightforward ... when it comes to assessing and doing risk-rating on people's lives, how on earth is that going to go?"
Extending the youth service was part of National's election manifesto, and Social Development Minister Anne Tolley said the programme, introduced in 2012, was having a greatly positive impact on many young people.
"Over the year to March 2014, 70 per cent of the youth payment recipients were able to live independently, rather than moving onto an adult benefit.
"This Government is committed to supporting young people to make positive transitions to adulthood."
Green Party MP Eugenie Sage said the party opposed the bill because of the paternalistic approach it took.
Ms Sage said the Greens had been told of parents having their benefits sanctioned for spending too long away from their course to attend a tangi, and other examples of "paternalism".
"We also have quite serious concerns about forcing single young people up to the age of 20 into a model with quite onerous accountability, based on the state's identification of them as at-risk young people."
There was a risk of arbitrary and unfair decision making, Ms Sage said, and could lead to young people feeling stigmatised and resentful.
"This is a huge infringement on human rights by having the state determine which category you fall into, and therefore which services you should have access to."
Darroch Ball from NZ First said the party supported the bill to select committee as it was fundamentally well intentioned, however there were concerning areas including the fact participation in the youth service would be mandatory.