The paradox of the employment agency: More and more employees, less and less success – and millions spent on external “experts”

Daily rates of €2,800? That's how generously the state pays consultants, while every cent counts when it comes to basic income.

While Germany is intensely debating cuts to the basic income and the federal government celebrates even the smallest reductions as a political victory, a look behind the scenes at the Federal Employment Agency (BA) reveals a completely different reality. In a system characterized by profound contradictions, hundreds of millions of euros flow to the world's most expensive consulting firms, while cuts are made to services for the most vulnerable members of society. Officially, the BA spent "only" 123 million euros on external expertise between 2015 and 2024, but this figure is merely the tip of the iceberg. The true figure, hidden in contracts declared as IT services, is likely to exceed the actual costs many times over.

This practice is not an isolated incident, but rather a symptom of a systemic problem deeply entrenched in the German employment agency since the Hartz reforms. Under the guise of unavoidable digitalization and the need for highly specialized knowledge, a persistent dependence on global players like McKinsey, Boston Consulting Group, and Accenture has become established. These firms profit from Silicon Valley-level daily rates and rampant opacity, which the Federal Court of Auditors has been sharply criticizing for years. The result is a paradox: The Federal Employment Agency is growing in staff and becoming increasingly expensive, yet it is performing its core task—placing people in jobs—less and less effectively. The number of placement officers is plummeting, and the success rate is collapsing. The following text exposes the questionable prioritization, the conflicts of interest, and the massive waste of taxpayers' money, which make a mockery of the public spending cuts imposed on the basic income.

Suitable for:

• The shadow bureaucracy: How external consultants German taxpayers and undermout the state's ability to act.

While basic income is being cut, hundreds of millions are flowing to the world's most expensive consultants.

The Federal Employment Agency faces a paradox that exemplifies the contradictions of German social policy. While the federal government is intensively searching for ways to save money on the basic income and even considers marginal cuts in the hundreds of millions a success, exclusive figures paint a completely different picture regarding the administrative expenditures of Germany's largest federal agency. According to the federal government, a total of €123 million flowed to external consulting firms between 2015 and 2024. However, the actual figure is likely to be considerably higher, as many IT services and specialized support services are not included in this official reporting.

These sums initially appear manageable compared to the total expenditures of the Federal Employment Agency, which amount to approximately €47.8 billion in 2025. However, a closer look reveals a systemic problem that goes far beyond mere number games and raises fundamental questions about the functioning and efficiency of the German employment administration.

The quiet rise of the consulting industry in the employment administration

The history of consulting expenditures at the Federal Employment Agency begins, not by chance, with the Hartz reforms of 2004. The transformation of the former Federal Employment Office into today's Federal Employment Agency was closely linked to external consultants from the outset. Between 2004 and 2016, the agency concluded contracts with a total volume of more than €255 million, of which €185 million was actually paid out. The list of commissioned companies reads like a who's who of the global consulting industry: McKinsey, Boston Consulting Group, Ernst & Young, IBM Germany, and Accenture.

More than half of these sums were allocated to IT modernization. Consulting firms received approximately €30 million each for employee training and for advising on the introduction and implementation of the Hartz reforms. The role of Roland Berger appears particularly explosive, as its management consultancy received a total of six contracts worth almost €10 million between 2002 and 2005. A manager from Berger's firm had previously been a member of the Hartz Commission, which conceived the very reforms whose implementation Berger then advised. This is a classic case of conflict of interest, where the same players first define the rules of the game and then get paid for their implementation.

However, the official figures only reflect a fraction of the actual expenditures. The German government itself admits that there is no uniform definition for external consulting and support services. Many IT projects are classified as technical services and therefore do not appear in the consultants' reports. The Federal Court of Auditors has been criticizing this lack of transparency for years. In a 2023 audit report, the highest financial control authority found that the German government's consultants' reports contained incomplete information, were riddled with errors, and in a third of the cases did not even name the companies commissioned.

Suitable for:

• The central contradiction: Deburocratization, advise on the profiteers of bureaucracy - the error in the system of bureaucracy reduction

Daily rates comparable to those in Silicon Valley for German government work

The cost structure of consulting contracts reveals a remarkable degree of generosity. According to information from tendering processes, external consultants to federal agencies are paid daily rates between €1,000 and €2,800. On average, rates range from around €1,000 for junior analysts to up to €1,850 for partners at large consulting firms. These figures are on par with those of top international consultants and far exceed the personnel costs of internal staff.

A particularly scandalous example was provided by McKinsey in 2017 at the Federal Office for Migration and Refugees. Due to an internal office error, the consulting firm billed interns as fully-fledged consultants, charging a daily rate of €2,800. A total of €280,000 was billed for three interns with a combined 100 working days before the mistake was discovered and corrected. This case is symptomatic of an industry that systematically exploits its market power vis-à-vis public sector clients.

In 2016, McKinsey was awarded a four-year contract with the Federal Employment Agency worth up to €21 million. The contract comprised 7,200 consulting days and covered IT consulting services. Particularly noteworthy is the fact that former McKinsey consultant Markus Schmitz had been working at the Federal Employment Agency as its Chief Representative for Digital Affairs since November 2016. While a spokesperson for the agency asserted that Schmitz was never involved in the tendering process for his former employer, such personnel connections raise fundamental questions about the independence of public decision-making.

Digitalization as a permanent construction site and gold mine

Digitalization has become the most important argument for using external consultants. For 2025, the Federal Employment Agency plans to spend €886 million on IT and the further digitalization of its services. The agency's IT systems house manages over 100 of its own IT systems in redundant, highly available data centers as a private cloud. Each year, approximately 30 projects run in parallel, along with 2,400 functional changes and 10,000 technical changes.

These impressive figures, however, raise the question of why an organization with 101,300 employees and its own IT department is so reliant on external support. The German government justifies this with the need for highly specialized, temporary expertise using state-of-the-art technology. In response to a parliamentary inquiry from the Left Party, it states that the necessary knowledge cannot be covered in sufficient breadth and depth by the Federal Employment Agency's internal staff. The need is novel and temporary, and the expertise required is highly specialized.

This argument, however, stands in stark contrast to reality. Digitalization is not a temporary challenge, but an ongoing process. If the same need exists year after year and the same consulting firms are repeatedly commissioned, one can hardly speak of temporary special cases. Rather, this points to structural deficiencies: Either the Federal Employment Agency genuinely lacks the necessary expertise on a permanent basis, in which case this expertise would have to be developed, or there is a lack of political will to utilize the knowledge that already exists internally.

The Federal Court of Auditors criticizes precisely this point. In a 2025 audit report, the authority states that the federal government lacks a strategy to reduce its dependence on external consultants. Particularly in the IT sector, the federal government must develop its own expertise; otherwise, the integrity of the administration is at risk. Most ministries have not even formulated concrete targets for reducing consulting contracts. In the federal IT consolidation project, the Interior Ministry even outsourced a core function: financial controlling.

The personnel paradox of the Federal Employment Agency

At the end of 2024, the Federal Employment Agency employed a total of 114,100 people, an increase of 1,100 compared to the previous year. Personnel costs rose from €3.9 billion in 2015 to €5.58 billion in 2024. Including the staff in the job centers, which are jointly operated by the Federal Employment Agency and local authorities, over 140,000 people work for the German employment administration.

Despite this massive staff, the number of employment advisors is steadily declining. While 19,593 full-time positions were available for placement in 2015, this number had fallen to just 13,942 by 2024 – a decrease of 30 percent. At the same time, the giant agency continued to grow overall. This development leads to a paradoxical result: the Federal Employment Agency is becoming ever larger and more expensive, while its core task – placing the unemployed in jobs – is becoming increasingly inefficient.

Direct job placements through the Federal Employment Agency have plummeted. In 2015, 13.2 percent of all job changes were triggered by placement suggestions from the Federal Employment Agency; by 2024, this figure had dropped to a mere 4.9 percent – ​​a new low. The remaining placement officers are now averaging only six successful job placements per year, or one every other month. Previously, the figure was 15 per year.

Social economist Bernd Raffelhüschen from the University of Freiburg succinctly summarizes the dilemma: The Federal Employment Agency is a behemoth with incredibly high administrative and personnel costs. Yet, precisely in its core business—placing people in jobs—there are fewer employees. And these employees are clearly working far less efficiently. The expansion by thousands of agency positions is incomprehensible. This Federal Employment Agency and its departments need to be scrutinized.

The Federal Employment Agency itself points out that more than half of its employees perform work that is largely independent of economic cycles and does not correspond to current unemployment trends. Career counseling is cited as an example. However, this explanation raises further questions: If more than half of the employees are engaged in activities not directly related to unemployment, what added value do external consultants, who are additionally commissioned, provide?

Our EU and Germany expertise in business development, sales and marketing - Image: Xpert.Digital

Industry focus: B2B, digitalization (from AI to XR), mechanical engineering, logistics, renewable energies and industry

More about it here:

• Xpert Business Hub

A topic hub with insights and expertise:

• Knowledge platform on the global and regional economy, innovation and industry-specific trends
• Collection of analyses, impulses and background information from our focus areas
• A place for expertise and information on current developments in business and technology
• Topic hub for companies that want to learn about markets, digitalization and industry innovations

Citizen's income cuts versus luxury consultants

The contrast between the cost-cutting measures for basic income and the generous approach to consulting contracts could hardly be greater. The German government plans to save around €2.5 billion on basic income in 2025 compared to 2023. This figure sounds impressive, but it is based on optimistic assumptions and a freeze on the standard benefit rate despite rising unemployment.

The Federal Ministry of Labor estimates that the latest tightening of the citizen's income regulations, passed in October 2025, will result in hardly any significant savings. According to the draft legislation, only €86 million are expected to be saved in 2026, and a mere €69 million in 2027. From 2028 onward, the Minister of Labor even anticipates increased costs. With total expenditures of approximately €52 billion for the citizen's income, this equates to a saving of less than 0.2 percent.

During his election campaign, Chancellor Friedrich Merz promised savings of five billion euros on the basic income program. This figure, however, proved unrealistic. Even if it were possible to place 100,000 basic income recipients in jobs, the state would save approximately three billion euros annually. But the economic situation makes such successes unlikely. Unemployment has been rising steadily since mid-2022, and the economic forecasts for 2025 are bleak.

In this context, the €123 million officially paid to external consultants between 2015 and 2024 seems like a slap in the face to those affected by benefit cuts. If one includes the unrecorded IT services and hidden consulting costs, the actual sum is likely to be significantly higher. The €886 million earmarked for IT and digitalization in 2025 alone far exceeds the total planned savings in basic income support.

Suitable for:

• A constructive alternative approach to the expensive flood of consultants of the federal government

The systemic dependence on external consultants

Consulting expenditures are not a problem limited to the Federal Employment Agency, but a nationwide phenomenon. The German government increased its spending on external consulting services from €186 million in 2021 to almost €240 million in 2023, a rise of 39 percent in just three years. Between 2020 and 2023, the German government spent a total of more than €1.6 billion on external consultants.

The Federal Ministry of the Interior leads the way with expenditures of almost €60 million in 2023 alone. The Ministry of Finance follows with €38.2 million. Here, too, the official figures only capture part of the reality. Many expenditures, particularly in the IT sector, are not subject to reporting requirements. The Federal Court of Auditors criticizes this, arguing that it prevents effective parliamentary oversight.

Consulting costs for the entire German federal administration have doubled in less than ten years, while at the same time the workforce has increased by around 50,000 positions to approximately 300,000 employees. This parallel increase in both in-house staff and external consultants is difficult to justify economically. Either the existing staff is not being used efficiently, or the wrong people are being hired.

The Federation of Taxpayers estimates that the actual expenditure on external expertise is far higher than officially reported. Including research contracts, scientific reports, and official advisory boards, the total quickly becomes significantly higher. The problem is not only the waste of taxpayers' money, but also the threat to government independence. If too many private companies are involved in government ministries, they also influence the work and decisions of these agencies.

## The economic logic behind the consulting industry

The consulting industry benefits from structural perverse incentives in the public sector. Unlike in the private sector, where consulting costs directly impact returns and are therefore subject to critical scrutiny, this mechanism is lacking in the public sector. Budgets are renegotiated annually, unspent funds often expire, and the success of projects is difficult to measure.

For decision-makers in public authorities, hiring external consultants is often the more convenient option than risking internal conflicts or developing their own expertise. Consultants provide legitimacy for difficult decisions, distribute responsibility, and contribute supposedly neutral expert knowledge. At the same time, they create a self-perpetuating dependency: the more that is outsourced, the less internal expertise remains, which in turn justifies further consulting engagements.

The major consulting firms have perfected this system. They place their alumni in key positions in the civil service, maintain close ties to politics, and shape the agenda through their roles on commissions and committees. The Hartz Commission is a prime example: consultants conceived the reforms and subsequently earned millions from their implementation.

The costs of this dependency extend far beyond direct expenditures. Institutional knowledge is lost when critical expertise is no longer developed internally. The administration loses the ability to independently analyze problems and develop solutions. A two-tier administration emerges, in which highly paid external consultants work alongside frustrated internal staff whose expertise is systematically ignored.

Alternatives and reform approaches

The new head of the Federal Employment Agency, Detlef Scheele, announced back in 2017 that he would focus more on in-house expertise and reduce the use of external consultants. Little has happened since then. The structural problems require more fundamental reforms. First, the Federal Employment Agency must invest heavily in building its own digital capabilities. The €886 million allocated for IT in 2025 should primarily be used to train its own employees and build internal capacity, not to pay for external consulting contracts.

Secondly, binding upper limits for consulting expenditures and a transparent reporting obligation are needed, which also includes IT services and other support services. The Federal Court of Auditors has submitted concrete proposals for reforming consultant reporting, which must be implemented. This includes a publication requirement for all consulting contracts above a certain threshold.

Thirdly, personnel decisions should be reconsidered. Instead of reducing the number of placement officers while the overall workforce grows, the Federal Employment Agency must concentrate its resources on its core tasks. The fact that only about 14,000 full-time positions are available for placement while over 100,000 people are employed in total indicates a massive misallocation of resources.

Fourth, Germany needs a fundamental debate about the role of external consultants in the public sector. Consulting can be useful in individual cases where temporary specialized expertise is genuinely required. However, it must not become a permanent fixture that replaces core administrative tasks. The integrity and independence of the public administration must be preserved.

Between austerity and waste

The consulting expenditures of the Federal Employment Agency reveal a fundamental credibility problem in German social policy. While the unemployed and those receiving basic income support are expected to demonstrate maximum efficiency, personal responsibility, and self-denial, the administration itself incurs expenditures that are completely disproportionate to the benefit. The 123 million euros that officially flowed to consultants between 2015 and 2024 represent only the tip of the iceberg.

The true figure is likely many times higher when all hidden consulting services, IT services, and support contracts are included. The annual IT expenditures alone, at nearly €900 million, demonstrate the true extent of the dependence on external service providers. These expenditures stand in stark contrast to the meager savings in the basic income, which, despite grand political pronouncements, don't even reach €100 million annually.

The problem isn't just the amount of spending, but its symbolic power. It reveals a double standard: one for the administration and one for those being administered. While recipients of basic income support face cuts for every missed appointment, government agencies can afford external consultants for decades without any measurable improvement in efficiency. On the contrary, the placement rate is at a historic low, even though more money than ever is flowing into public administration.

The Federal Employment Agency thus stands as a symbol for a larger failure of the German welfare state. The question is not whether cuts are necessary, but where they should be made. The politically weak bear the burden of the cuts, while the powerful continue to live lavishly. McKinsey, BCG, and the other major consulting firms profit handsomely from a system that is failing its intended users.

A modern employment agency should be able to handle its tasks largely independently. It should possess sufficient internal expertise to manage digitalization projects, optimize processes, and train its staff. If this is still not the case after more than 20 years of reform and hundreds of millions of euros spent on consultants, then the problem lies not in a lack of external input, but in the internal structures.

The solution cannot be to invest even more money in external consultants. Instead, the Federal Employment Agency must finally learn to stand on its own two feet. This means systematically building internal expertise, hiring the right people, and using existing staff effectively. It also means refocusing on core tasks and reducing the rampant bureaucracy.

The alternative would be a permanent dependence on a global consulting industry that has little interest in sustainable solutions. After all, every problem solved means fewer follow-up contracts. Germany urgently needs an effective public administration. For this to happen, however, politicians would have to summon the courage to make difficult decisions and stand up to powerful interest groups. The consulting lobby undoubtedly falls into this category.

As long as this courage is lacking, hundreds of millions of euros will continue to flow to consulting firms, while cuts are made for the most vulnerable members of society. The Federal Employment Agency will continue to grow, become more expensive, and operate less efficiently. And the placement rate will continue to fall, while the number of hours spent on consultants increases. This is a situation that a wealthy country like Germany cannot actually afford, but apparently continues to tolerate.

☑️ Our business language is English or German

☑️ NEW: Correspondence in your national language!

Konrad Wolfenstein

I would be happy to serve you and my team as a personal advisor.

You can contact me by filling out the contact form or simply call me on +49 89 89 674 804 (Munich) . My email address is: wolfenstein ∂ xpert.digital

I'm looking forward to our joint project.

☑️ SME support in strategy, consulting, planning and implementation

☑️ Creation or realignment of the digital strategy and digitalization

☑️ Expansion and optimization of international sales processes

☑️ Global & Digital B2B trading platforms

☑️ Pioneer Business Development / Marketing / PR / Trade Fairs

Benefit from Xpert.Digital's extensive, fivefold expertise in a comprehensive service package | R&D, XR, PR & Digital Visibility Optimization - Image: Xpert.Digital

Xpert.Digital has in-depth knowledge of various industries. This allows us to develop tailor-made strategies that are tailored precisely to the requirements and challenges of your specific market segment. By continually analyzing market trends and following industry developments, we can act with foresight and offer innovative solutions. Through the combination of experience and knowledge, we generate added value and give our customers a decisive competitive advantage.

More about it here:

• Use the 5x expertise of Xpert.Digital in one package - starting at just €500/month