An economy experiences the following changes in its labour market:
Assuming wage and productivity levels in competitor nations remain unchanged, which of the following is the most likely outcome for this economy's unit labour costs (ULCs) and its international competitiveness?
Unit labour costs will rise by approximately 4%4\%4%, leading to a deterioration in international competitiveness.
Unit labour costs will fall, leading to an improvement in international competitiveness.
Unit labour costs will rise because the increase in non-wage labour costs automatically raises the marginal cost of labour.
Unit labour costs will remain unchanged because productivity gains are offset by wage and non-wage cost pressures.
