Oh, Delphinium, the thing is, whatever the changes are, this attitude is NOT new this year. Teachers, and parents, have thrown such negative motivation at children for generations. They do it in school systems that dont even have a formal exams sequence, but apply it to whatever other thing has been determined to be the One Thing That Will Define You For Life in that system. There are the very few who take it as a challenge, dig deep and manage to do better than expected. But a great many, having known themselves and their abilities rather intimately, accept the message that they are useless and doomed.
On theother hand, kids both academically talented and not, clever or not look around them and see the whole thing is a lie. They can see people who got their papers and still are unemployed or underemployed. They can see people who graduated without, began at the lowest level and moved up, managing to aquire paper qualifications on a strictly as needed basis. Maybe they were always better than everyone thought at the One Thing stage. Maybe they have simply relaxed due to the confidence of accomplishment outside of academics. Maybe their slow development has finally brought them to the academic maturity others had at 15.
Threatening students with a line that ignores these truths is a particular tunnel vision of teachers, after all. The system worked for them. Their students results may have recently become formally part of their job review, but the concept has been there all along. a teacher whose students consistently did poorly was moved to another year, or another school, or simply given a roomful of students like OPs DCs, who mostly left before exams happened.
I know you want us to be all very aware of the new requirement for paper qualifications at the lowest level of jobs, but even that may well fall by the wayside if employers find it useless. The OPs children already have entry level jobs, and if they do well, and their employers want to promote them ways will be found in the post-secondary system. It may be that they have to aquire the paper qualifications later, but that is much easier to do, for some, outside the high school atmosphere and with a specific goal and focus. That's why these systems exist.