... common currency, which is usually the US dollar. Changes in ULC will thus be caused by changes in wage rates or productivity levels. A rise in relative Unit Labour Costs indicated that a country is becoming less competitive on the international market. UK's position: Change in UK's ULC's can be seen in Fig.1: Figure 1: IMF Index of Relative Unit Labour Costs - Normalised: Index (1990=100) Since 1996 Relative Unit Labour Costs have risen sharply; this implies that competitiveness has worsened by 40%. This is due to the continued strength of the pound, slower productivity growth and faster growth of wages and earnings (leading to rising unit wage costs). - Exchange Rate A depreciation (fall in value) in an economy's exchange rate makes its exports cheaper and imports more expensive. Hence an appreciation (rise in value) of the exchange rate in an economy will make its exports more expensive, and will make ...

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