World-System (1960-2015) How is the French Labor Market Controlled?

 

In an earlier post describing how the Economy of France works (here) I showed that the Historical Labor Market Feedback Controller was described by:

FR3=(LU-L-N)

Where LU=Unemployment, L=Labor Force and N=Population. What the controller says is that Unemployment is monitored relative to Population and the overall Labor Force. The historical FR3 controller which explains 3% of the variation in the FR State Space (see the Measurement Matrix in the Notes Below) peaked between 1985 and 2000 and then declined after that. Starting in the 1970s, this was a very high period for French Unemployment which took almost 30 years to correct. This historical bulge in Unemployment gave the Economy of France a reputation of having persistent high Unemployment which is not supported by the data. But what caused the Unemployment Bulge?

The Unemployment Bulge from 1975 to 2010 in France was caused by the World System, specifically by shocks to Agricultural and Oil Markets.

In this post I will show results from the FRL20 Model to explain the conclusion. The graphic above also shows the attractor path for FR3 (dashed red line) driven by the World System (WL20 Model). The attractor path suggests that this source of World System shock is over for the immediate future. However, the system is sensitive to World Agricultural and Oil Markets. It seems unreasonable to forecast that these markets will adjust less radically in the future.

Keep in mind that the FRL20 BAU model is approaching a steady state around 2035 (graphic of the FR1 Growth Component above). In a steady state economy, there is a constant stock of capital and people. The only variability in the FR3=(LU-L-N) historical feedback controller is essentially Unemployment (LU) and possibly Labor Force participation, L. Unemployment might also stabilize, but that is not a certainty (Goldman-Sachs predicts that AI could replace 300 million full-time jobs, here, between 2025 and 2030). On the other hand, current AI Energy Demands might not be sustainable (here). And, needless to say, we are dealing with the predictions of a model--we will have to wait for the Future to know what actually happens.

You can experiment with FR3 in the FRL20 Model here.

Notes

The Measurement Matrix for the Economy of France is presented above. All indicators (columns of the matrix) are taken from the World Development Indicators. FR1=(Overall Growth), FR2=(Historical Environmental Controller) and FR3=(Labor Market Controller). For information about how the models were constructed, see the Boiler Plate.