The country’s official bureaucracy cost index has recorded a decline in bureaucratic costs since 2012. However, it covers only reporting and documentation requirements arising from federal laws. It excludes EU law, state and municipal regulations and the burden created by constant legislative changes. Economists at the IW therefore argue that the official measurement creates a false impression of precision. The Ifo Institute puts the economic output lost to bureaucracy at €146bn ($167bn) each year.

Private Sector Sheds Jobs

While the government hails its success in cutting red tape, economic data tells a different story. The labor market is undergoing a striking shift. The claimed reduction in bureaucracy has coincided with a curious development. In 2025, industrial employment fell by 124,100. Construction lost 23,000 positions, while trade, transport and hospitality shed a further 15,000. The public sector, by contrast, added 95,100 jobs.

When education and health care are included, the total increase rises to 205,000. No other sector of the economy saw a larger absolute increase in employment in 2025. While the public sector added jobs, the private sector was cutting them. At the same time, the number of vacancies fell by 35,000, according to Germany’s Federal Employment Agency.

Value Added Falls Sharply

In economic terms, the shift of jobs into the public sector alone shrinks the economy’s productive base. Manufacturing generates around €74 ($85) in value added per hour worked. The corresponding figure for the public sector is only around €50 ($57). When workers move from the former to the latter, economy-wide value added falls by €24 ($27) per hour, even if total employment remains stable. The state’s funding base consequently erodes while its costs rise and place an increasing strain on the budget.

The federal government promises less bureaucracy. Companies are experiencing more of it. Official measurements exclude major sources of red tape. Europe, meanwhile, continues to produce regulations that Germany simply waves through. And while industry, trade and other private businesses shed jobs, the public sector remains the only sector still creating new positions on any significant scale.

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The government celebrates billions in savings, most of which come from correcting earlier laws that one of the parties now in power helped to introduce. Yet businesses say that red tape is increasing. The only additional positions some companies are creating are those needed to comply with new or amended regulations. Mass layoffs loom in other sectors.

Reality Is Worse Than Official Figures Suggest

The official index reports progress because it does not measure most of the actual burden in the first place. At the same time, the sector where bureaucracy is concentrated is expanding, while the sectors that must finance it are shrinking. The public sector added more jobs in 2025 than any other part of the economy. Yet the total number of vacancies fell. Germany is moving workers away from value-creating sectors and into the administrative apparatus.