Unit Labour Costs as an Indicator of International Competitiveness

According to the concept of the productivity-oriented wage policy, increases in wages should be guided by the development in labour productivity. This would leave unit labour costs unchanged. This applies, however, only to economies which are in equilibrium; it is not valid for disequilibrium situations, as is illustrated by the British economy and the Austrian nationalized industries. The labour productivity actually measured is not an exogenous variable, but is influenced through substitution processes by the development of wages. Wage policy, therefore, should be judged by the traditional economic performance criteria, rather than by development of productivity.