RULC

This time, only GDP and RULC are significant; none of the two variables used for the quality of institutions are determinants for FDI.

Labour market RULC Real unit labour cost (euro), expressed as annual growth LAB Nominal compensation per employee, euro ITR Implicit tax rate on labour, % PR Labour productivity, euro per hour worked SCH The percentage of persons who completed the secondary stage of education, % RS Unemployment rate, % III.

Next, we investigate the RULCs by industry and region, and then the extent to which competitiveness, defined by relative unit labour costs (RULC), is determined by a nominal labour cost advantage or a relative productivity advantage (RLP).

Table 1 presents the average RULC, RNLC and RLP in the nine one-digit sectors by industry and region, compared with the average national level over 1978-95 and 1995-2009.

Changes in relative unit labour costs (RULC) can be decomposed into two component parts: changes in relative nominal labour costs per hour (RNLC) and relative labour productivity (RLP):

It shows the annual growth rate of the coefficients of variation for RULC, RNLC and RLP for the provincial comparisons by nine industries over 1978-95 and 1995-2009.

First, convergence in RULC growth rates is apparent for all industries in the period prior to 1995, with the exception of Finance.

Figure 2 presents trends in the coefficients of variations of RULC for provincial comparisons from 1978 to 2009.

Despite the totally unrelated methodologies, and total different data sets and data requirements, precisely the same product groupings are identified as the most internationally competitive for South Africa as were found using the RULC approach.

(2.) Since Nordas placed the SA Unit Labor Cost in the denominator (relative to that of the U.S.), the higher the calculated RULC, the higher the degree of SA competitiveness.

Relative Unit Labor Costs Calculated by Nordas, 1990 Average VA Average wage per worker per worker RULC Index USA RSA USA RSA (3/4)/(1/2) Sector (1) (2) (3) (4) (5) Low-wage 61.92 9.73 20.58 6.13 0.53 Medium-wage 70.46 17.22 28.28 9.90 0.70 High-wage 122.97 28.62 36.40 13.00 0.65 Low-technology 67.32 14.58 23.51 7.82 0.65 Medium-technology 82.87 17.60 28.92 10.56 0.58 High-technology 86.36 17.37 32.71 10.89 0.60 Resource-intensive 82.01 18.03 23.47 7.56 0.68 Labor-intensive 46.03 8.54 20.51 6.36 0.60 Specialized supplier 67.35 16.22 28.58 10.65 0.65 Scale-intensive 87.20 19.39 28.86 11.46 0.56 Science-based 96.36 16.63 35.81 11.45 0.54 Source: Nordas (1996), Table 5 TABLE 2.