Ifo criticizes public sector as inefficient

According to the Dresden Ifo Institute, the public sector in Germany is exacerbating the staffing problems in the private sector. Employment in the public sector has increased in recent years, explained economist Marcel Thum, referring to figures from statistical offices. "Instead, public administration should have pushed ahead with digitalization in order to save on staff with the efficiency gains."

Lagging behind in digitalization

According to Thum, the public sector has not adequately prepared itself for the fact that the working-age population will shrink. "Furthermore, costs are rising because the wages of public employees are aligned with those of the private sector without becoming equally productive. Taxpayers will have to bear these additional costs," said the Ifo researcher.

The scientist referred to studies according to which Germany is lagging behind in the public sector when it comes to digitalization. "While companies are using automation and streamlining work processes, new jobs are being created in the public sector instead of questioning old tasks and processes."

Digitalization in the private sector is increasing labour productivity overall, it said. Ultimately, this would also increase wages in the public sector. These higher wages would then have to be paid for the increasing or constant number of employees in the public sector.

Burden for taxpayers

"This development will overburden taxpayers in the long term. In the long term, however, it also endangers the entire economy, as the public sector drains it of workers," explained Thum. This will exacerbate the shortage of skilled workers throughout the economy. The state must focus more on digitalization and process optimization in order to deal responsibly with increasingly scarce resources.