The public sector in Germany is exacerbating the personnel problems for the private sector, according to a study by the Ifo-Institute’s Dresden branch.
Employment in the public sector has increased in recent years, as shown by the data from the Federal Statistical Office and the State Statistical Office of Saxony. Instead, the public administration should have prioritized the digitalization of its processes to achieve efficiency gains and reduce personnel, the Ifo-Institute argues. This has left the public sector unprepared for the decline in the working-age population.
“Moreover, costs rise because public sector employees’ salaries are aligned with those in the private sector, without a corresponding increase in productivity” said Ifo researcher Marcel Thum. “These additional costs must be borne by taxpayers.”
Germany lags behind in the digitalization of the public sector, as shown by the EU’s Digital Economy and Society Index (DESI) and the Expat Insider Report. “While companies use automation and streamline processes, the public sector creates new positions instead of questioning old tasks and processes” Thum said.
Digitalization in the private sector increases overall labor productivity, which in turn leads to higher salaries in the public sector. These higher salaries must then be paid for the increasing or constant number of public sector employees. “This development will overburden taxpayers in the long run and also endangers the entire economy, as the public sector is taking away the workforce from the private sector” Thum said.
“This, in turn, exacerbates the shortage of skilled workers in the entire economy.” The state must focus more on digitalization and process optimization to responsibly manage the dwindling resources.