Off course: Education spending in Germany

Abstract

According to the indicators used here, the German population has a particularly high level of education in international comparison and thus is likely to continue to earn high incomes in international competition. However, this standing will be jeopardised if education policy in Germany does not stand up to the challenges. There is a serious need for action. What is needed is a twofold strategy consisting of reforms to increase efficiency and higher funding to further improve the performance of the education system. A policy of this kind would lead the way to long-term growth opportunities and could even be cost neutral if the required extra spending were financed by reducing the subsidies which conserve the present structure9. However, a higher deficit in public budgets would also be acceptable as a means to finance additional spending on education, training and further training, given that these are investments which will pay off in later years. Discussions on the wage dispersion by level of education in Germany often overlook the fact that it corresponds to the average for OECD countries. The greater the influence of additional education on individual income levels, the greater is the justification for private funding of the costs of education. This applies in particular to third-level education. Third-level graduates who were able to study free of charge in the past and are now earning high incomes could participate during a transition period in financing the costs of third-level education today.