Title: Workers' remittances, current private transfers and compensation of employees in the German Balance of Payments Statistics
1Workers' remittances, current private transfers
and compensation of employees in the German
Balance of Payments Statistics
2Background
- The main source for statistics on international
remittances is the Balance of Payments (BOP) - In this regard, BOP compilers have been faced
with an increasing interest in remittance data in
the last decade - This increasing interest, however, puts some
pressure on compilers as data on remittances been
judged by users as less reliable compared to
other BOP items. - Especially the lack of comparability (usually
remittance credits exceed debits) indicate
differences in the coverage and compilation - What are the reasons for these differences?
-
3Background
- Generally, the multitude of channels used for
sending remittances make the collection of data
difficult. - The channels vary from country to country, from
remitter to remitter, from the financial system
in the sending and receiving country, the
convenience and cost. - Furthermore, the small size of the individual
transactions makes it very difficult to detect
remittances in the frame of the general BOP
collection system. - It should be also mentioned, that a certain lack
of interest in developed countries in this
sub-item of the BOP, which is of minor importance
for them compared to other items, may contribute
to some of the inconsistencies
4Outline
- 1. Current data sources and data published for
the components of the future items "personal
transfers" and "personal remittances" - a) Workers' remittances
- b) Current private transfers
- c) Compensation of employees (net)
- 2. Weaknesses of the current system
- Measures to improve the current statistic
- 4. Compiling and presenting remittance data
51 a) Workers' remittances
- General remarks
- The collection of data on workers' remittances is
embedded in the general reporting requirements.
These requirements stipulate that all payments
above the relevant reporting threshold (at
present 12,500 EUR) must be reported to the
Bundesbank. - In Germany, it was assumed throughout the years
and regardless of the respective amount of the
threshold (DM 500, DM 1,000, DM 2,000 etc.), that
remittances of migrant workers to their home
countries exceeded the threshold only in rare
cases. Accordingly, a method was implemented to
estimate these flows for the German Balance of
Payments.
61 a) Workers' remittances
- Sources
- Monthly collective reports by selected banks.
Some of them are branches of foreign banks
(primarily Turkish but also from other countries
like the Philippines). The reports comprise cash
deposits with a beneficiary abroad - In addition, some banks report monthly collective
reports about cash deposits or transfers of
foreigners into accounts held by foreign banks - Data from the Federal Employment Office about the
number of employed and unemployed foreigners
subject to social insurance contributions
(corrected by cross-border and seasonal workers). - To assure that the mentioned bank reports contain
also information about cross border payments
below the threshold, special agreements between
the banks and the Bundesbank were made.
71 a) Workers' remittances
- Calculation method
- To differentiate between workers' remittances and
payments for other reasons, percentage rates for
each receiving country are applied to the amounts
reported in the case of payments to accounts
abroad. - Remittance flows per capita are calculated by
dividing the reported values by the number of
non-residents reported by the labour agency. - It is assumed, that every (registered) guest
worker in Germany remits a minimum amount of EUR
1,200 and a maximum amount of EUR 2,000 to his
home country each year. - The average amount per capita is calculated on
the basis of bank reports and compared with the
minimum/maximum amount. If the reported amount
lies in between the min/max amount, the reported
value per capita is used. If the reported amount
is below/above, the min/max amount is used. - Multiplied with the number of registered persons
per nationality yields to the total amount per
country.
81 b) Current private transfers (household
to household)
- General remarks
- Current private transfers are collected via the
regular collection system, i.e. only payments
exceeding the exemption threshold of EUR 12,500
are reported. - For transactions below the threshold an
estimation method is applied, however this method
was not specifically developed for private
transfers. - Depart from this estimation, no other
corrections/estimations are made.
9 1 c) Compensation of employees
- General remarks
- Similar to workers remittances, salaries paid are
normally below the respective threshold and
therefore not captured by the reporting system. - Even if a single transaction exceeds the
threshold, reporters are often not aware about
their obligation to report because, from their
point of view, the payments often take place
between two resident accounts (for instance,
wages of German employees paid by foreign
embassies). - Hence, the Bundesbank uses indirect sources to
estimate compensation of employees gross and net.
10 1 c) Compensation of employees
- Sources
- Statistics of the Federal Employment Office
(number of cross border/ seasonal workers and the
respective country of the employee) - Statistics of the Federal Statistical Office
(quarterly calculation of average gross income
(credits/debits for neighboring countries) - Statistics of the Federal Ministry of Finance
(compensation of German employees working for
foreign military forces stationed in Germany) - Statistics of the Federal Foreign Office
(compensation of foreign employees working in
German embassies abroad) - Annual reports of International Organizations
(compensation of German employees) - Partner country data for receipts of German
workers employed in CH, LUX, NL, FR
11 1 c) Compensation of employees
- Calculation method
- FSO calculates an average income, separately for
cross border and seasonal workers. The average
wage is multiplied with the number of employees
(foreigners in Germany, Germans abroad). To this
amount the contribution of the employer to social
insurance is added. For German receipts from CH,
LUX, NL and FR we use partner country
information. - To come to the net income, the total contribution
to social insurance and taxes on income is
deducted from the gross value. Finally, a
correction for travel is made by the Bundesbank. - Regarding income received from foreign military
forces and international organizations, no
additional corrections are made. In the case of
income paid/received by embassies in
Germany/abroad, information from the national
accounts are used.
12 2 Main weaknesses
- Workers remittances
- Money flows through informal channels and by
illegal workers from countries which are not
included in the database of the Federal
Employment Office are not reflected adequately. - Assumed minimum/maximum amount has not been
proofed - Estimation method does not take into account the
propensity to remit. - Current data from the banks do not allow to
distinguish in all cases for what purpose the
actual payment is made, e.g. for basic needs of
relatives or for other purposes like deposits in
own accounts. - No information about workers remittances credits
132 Main weaknesses
- Current private transfers
- Data source does not assure an adequate coverage
of all private transfers. - The breakdown by country is distorted as
only the information of reported payments above
the threshold is used. - Compensation of employees
-
- Germans who work abroad for more than one year
are treated as residents and their salaries are
included undistinguishable in compensation of
employees.
143 Measures to improve the current statistics
- Remittances
- Use of data from money transfer companies
(Western Union etc.). - Currently, the Bundesbank is checking the
usefulness of aggregated information provided to
us by the Federal Financial Supervisory
Authority. -
- Results
- Information from this source could be
another piece in the puzzle, for instance
regarding the country breakdown, but is not the
final solution. - However, it is planned to use this source as a
starting point to estimate workers remittances
credits.
15Measures to improve the current statistics
- With view to future definition of private
transfers - It will be necessary to collect more detailed
sector information to capture household to
household transfers. - Problems
- - The sector in the receiving country is not
always exactly known by private declarants (how
would a private person sectorise a payment via a
non profit organisation?) ? distortion of the
results - - Second, political pressure to reduce the
statistical burden for private persons. This
could result in a complete exemption of private
person from all or most of their reporting
obligations ? use of secondary information may
result in less quality and comparability
16Collection approaches to obtain data(a)
Transaction Reporting
- Remittances transferred using international
networks, typically from the banking system. - Data can be collected from banks using
international transaction reporting systems
(ITRS) based on the information given by the
sender in the payment order.
COUNTRY A (sender)
COUNTRY B (receiver)
BANK A
ACCOUNT
ACCOUNT
receiver
sender
ACCOUNT
ACCOUNT
ACCOUNT
17Collection approaches to obtain data(a)
Transaction Reporting
- Strengths
- Timely information as data are registered by ITRS
at the moment when a transaction is settled - Low cost as data on remittances are essentially a
by-product of the cross border settlement. - Weaknesses
- Does not cover international payments outside the
banking system or transfers in kind. - Depending on changing political environment (e.g.
discussion in the EU on raising the reporting
threshold to EUR 50.000 to reduce the reporting
burden for banks in the frame of the Single
European Payments Area (SEPA)).
18Collection approaches to obtain data(b) Direct
Reporting
- Remittances sent by using Money Transfer
Operators (MTO) - MTOs tend to aggregate and net settlement
payments. As such, direct reporting would seem to
be an appropriate method for collecting detailed
information about individual transactions.
COUNTRY B (receiver)
COUNTRY A (sender)
Central Clearer of MTO
receiver
sender
AGENT of MTO
AGENT of MTO
Information sender, receiver, amount, etc.
19Collection approaches to obtain data(b) Direct
Reporting
- Strengths
- Low costs, because the number of reporters is
normally not large. - Reliable as all relevant information is available
and full coverage of remittances routed through
the MTOs. - Weaknesses
- No information about remittances sent through
other channels or transfers in kind - MTOs cannot assure that transactions other than
remittances are excluded.
20Collection approaches to obtain data(c)
Household surveys
- Remittances sent outside the formal sector
- Especially if remittances sent via informal
channels, the appropriate way to collect
remittance data is asking senders and receivers
directly.
COUNTRY A (sender)
COUNTRY B (receiver)
BUS COMPANY
busdriver
busdriver
receiver
sender
Information sender, receiver, amount etc.
21Collection approaches to obtain data(c)
Household surveys
- Strengths
- Direct control over information collected.
- Possible to collect data sent through formal and
informal channels. - Weaknesses
- Costly and methodologically demanding.
- Under-reporting because information requested are
considered sensitive by the respondents.
22Collection approaches to obtain data(d) Data
Models
- Direct reporting (asking banks, MTOs,
senders/receivers) is difficult and impractical
for a number of reasons. - If direct measurement is no option, models based
on secondary data could be used to estimate
remittance.
Direct data collection
BoP COMPILER
BANK
MTO
SENDER
RECEIVER
23Collection approaches to obtain data(d) Data
Models
- Strengths
- Estimations are definitely able to cover formal
and informal channels. - Low costs as secondary data (eg administrative
data) is available at no extra cost. - Weaknesses
- Input data can be weak (e.g. if migrant
population is partly estimated). - Assumptions about variables which influence the
propensity to remit may be problematic (problem
to test or verify them in practice) and fixed
over time.
24Further guidance
- Given the multitude of channels and possible
approaches that are available for
collecting/estimating remittance flows, the
compilation guide of the Luxembourg Group further
contains a practical four-step approach to
develop a country-specific data development plan - Step 1 Understanding the current situation.
- Step 2 Evaluation of current data collection
system. - Step 3 Prioritization.
- Step 4 Improvement and Expansion of data by
channel.
25Further guidance
- Besides providing definitions, compilation
guidance and proposals how to improve data the
guide also reviews good practices in
disseminating remittance data. - As a general rule, the DQAF of the IMF gives good
guidance on diverse aspects of dissemination
practices - Further recommended is the publication of
bilateral data. However, it is recognized that
the collection of bilateral data is challenging - The dissemination of bilateral data should
therefore be part of a longer term program and
should focus on relevant corridors (pairs of
countries with large flows)