Ifo Institute Warns Public Sector Inefficiency Worsens Germany’s Labor Shortage

A report highlights how poor digitalization and rising public sector employment strain taxpayers and exacerbate workforce challenges.

The Ifo Institute criticizes Germany's public sector for inefficiency and insufficient digitalization, citing its negative impact on the economy.
Public sector employment has increased in recent years, diverting workers from the private sector and worsening the labor shortage.
Experts argue that better digitalization in public administration could have reduced the need for additional personnel, easing costs and resource strains.
The report notes that public sector wages rise alongside private sector productivity gains, despite the former not achieving comparable efficiency improvements.
The Ifo Institute calls for urgent reforms in digitalization and process optimization to address shrinking workforce numbers and reduce the financial burden on taxpayers.