Re-introduction of compulsory military service could cause overall economic costs in the billions
The re-introduction of conscription in Germany could result in economic costs in the billions, according to the Ifo Institute. This finding comes from a study by the Munich Economic Research Institute for the Federal Ministry of Finance, which was announced on a Wednesday. The analysis examines the costs of conscription in three scenarios. If conscription affects an entire age group (100 percent), the economic output could decrease by 1.6 percent or nearly 70 billion Euros. If conscription affects a quarter of an age group, as was the case with the old conscription, the economic strength could decrease by 0.4 percent or 17 billion Euros. If only five percent of an age group is conscripted, similar to Sweden, the decrease would be 0.1 percent or three billion Euros, according to the Ifo Military Expert Marcel Schlepper.
"A conscription as part of a social duty year would annually cause economic costs that are roughly the same size as the funds from the defense budget and the Bundeswehr Special Fund in the year 2024," said Ifo Military Expert Marcel Schlepper. The costs arise primarily because young people build up their human capital, such as wealth and economically valuable skills and knowledge, later. Experts refer to this as human capital.
"As an alternative to conscription, it would make more sense to fund the Bundeswehr with more resources to make it a more attractive employer," explained Ifo Researcher Panu Poutvaara, Head of the Ifo Center for International Institution Comparison and Migration Research. "A possible measure would be to pay higher wages to conscripted soldiers." This would indeed put more strain on the state budget, but the overall economic costs would be more evenly distributed and would be significantly lower than with conscription: 37 billion instead of 70 billion Euros (in the 100-percent scenario), nine billion instead of 17 billion Euros (in the 25-percent scenario), and two billion instead of three billion Euros (in the 5-percent scenario). The military skills of the Bundeswehr would grow in the labor market in each scenario to the same extent as with conscription.
- The Ifo Institute's study, announced on a Wednesday, suggests that the re-introduction of compulsory military service in Germany could lead to economic costs of up to 70 billion Euros if it affects an entire age group.
- Marcel Schlepper, the Ifo Institute's Military Expert, explained that the costs of conscription arise primarily because young people delay building their human capital, such as wealth and economically valuable skills and knowledge.
- According to Ifo Researcher Panu Poutvaara, funding the Bundeswehr with more resources to make it an attractive employer would result in significantly lower economic costs compared to conscription, even if it puts more strain on the state budget.
