Germany Leads Europe in Social Spending But Trails in Education Investment, Study Finds

A recent study by the Institut der Deutschen Wirtschaft (IW) reveals Germany's 2023 public budget allocation heavily favors social security and administrative costs, with notably low investment in education compared to other European countries. Germany dedicated 41% of its total expenditures to social security—which includes pensions, health insurance, unemployment insurance, and Bürgergeld—surpassing the Nordic countries' 40% and the Benelux nations' 38%. Notably, half of Germany's social security budget is directed toward pension security, raising concerns about sustainability. IW expert Björn Kauder emphasized the need for pension reforms to mitigate future cost increases for taxpayers, pointing to Sweden’s pension overhaul 25 years ago as a successful example.

Contrasting sharply with social spending, Germany allocates just over 9% of its budget to education—the lowest among its European peers. This contrasts with Nordic countries allocating 12.5%, and Austria and Switzerland spending about 50% more than Germany's education budget. The findings highlight Germany’s lagging public investment, which stands at approximately 6%, below the EU average of over 7% and significantly trailing Nordic countries that invest over 9%. Meanwhile, administrative expenses have risen sharply from around 7% in 2001 to 11% in 2023, marking the highest share among Germany’s neighboring countries.

The study analyzed public expenditure trends across Germany, the Benelux countries, Austria, Switzerland, and the Nordic region between 2001 and 2023 using OECD data relative to GDP. The pronounced focus on social security and administration, paired with comparatively low education expenditure, paints a clear picture of Germany's budgetary priorities. The growing administrative costs and the large social security share—with pension obligations a significant driver—underscore ongoing fiscal challenges. Experts call for reforms to balance budget allocations and improve sustainability in the face of demographic and economic pressures.