The long-established synergy between German economic competitiveness and vocationally trained mid-skilled workers is questioned as Germany transitions to the knowledge economy. We study how the German political economy changes in the knowledge economy with an eye to the ever-increasing mid-level skill shortage, exemplified by the ever-increasing excess of apprenticeship spots. While the literature has investigated how Germany upskills, namely how its skill distribution moves towards the higher end, it has overlooked the shortage of industrial workers, who are typically trained through Germany’s renowned vocational education and training (VET) system. We fill this scholarly gap by studying the fascinating puzzle of how Germany can secure mid-level skills in an age that often dismisses VET as a relic of the past. Conducting process tracing informed by document analysis and interviews with experts and stakeholders, we show that a key part of Germany’s adaptation to the knowledge economy consists in internationalising its VET to secure mid-level skills domestically. The political consensus around this strategy revolves around training people abroad according to German standards and facilitating recognition of foreign qualifications to fill the mid-level skills shortage. This represents an instance of institutional layering and an ideal case to study the agency behind institutional change.