Germany has highest social security spending in Europe, study finds

A new study from the German Economic Institute (IW) has found that the federal republic dedicates a higher percentage of overall public spending to its social security system than any other European country.

German social security spending highest in Europe

According to a new study from the IW, Germany is the European country which earmarks the highest percentage of its budget for social security. In 2023, 41 percent of Germany’s public budget went towards funding its social security system. Almost half of the social security budget went towards funding the German pension system and 16 percent on the healthcare system. 

By comparison, the Nordic countries - often thought of as the European frontrunners in social security spending - , Austria and Switzerland all dedicated 40 percent of their overall budget to social security. The EU average sits at 39 percent of member countries’ overall budgets.

However, since 2001, Germany, the Nordic countries, the Benelux countries, Austria and Switzerland have all seen a downward trend in the percentage of overall spending dedicated to social security. The 2008 financial crash saw social security spending plummet further, before increasing slightly to plateau, briefly peak around the coronavirus outbreak, then continue the downward trend. 

Germany is considered the birthplace of the modern social security system. In 1883, the first chancellor of the German Empire, Otto von Bismarck, founded the statutory health insurance system. The system initially only applied to industrial, craft and trade employees and was based on the principle that employees should not face existential hardship should they be unable to work.

Germany spends less than EU average on education

While Germany leads the way in social security spending, it’s dragging behind in education. Here, the Nordic countries, Austria and Switzerland are frontrunners, dedicating between 12 and 13 percent of their overall annual budgets to education. 

Benelux countries dedicate between 11 and 12 percent, the EU average sits at 11 percent, but Germany dedicates just 9,6 percent of its overall budget to education. In contrast to social security spending, Germany's education spending has increased since 2001, when just 8,6 percent of the budget went towards funding schools, universities and other higher education institutions.