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Layard & Nickell (2005) define unemployment as “a situation in an economy, where a person can and willing to work, but does not get an opportunity to work”. However, it does not necessarily mean that when an individual gets an opportunity to work than he/she is employed. A person can only be employed if the opportunity he/she gets to work makes him/her “gainfully employed in any productive activity” (Layard & Nickell, 2005). Economic wellbeing and growth do not necessarily guarantee that a majority of individuals are absorbed into productive activities that build the economy of the society. This is because there a number of unemployment types depending on the nature of economy, skills to engage in work and a number of social political influences. A job can be available for an individual, but the individual turn down the offer, which is referred as voluntary unemployment (Lipsey & Harbury, 1988). Through a number of various types of unemployment, one can easily find out if the unemployment is voluntary or involuntary.

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Real wage unemployment

Real wage unemployment occurs when wages are too high above the equilibrium level creating a basis for the supply of labor to be superior to the demand for labor. Layard & Nickell (2005) trace the root of the real wage unemployment to the desire and expectation of individuals that certain employments should hold high wages, creating a wage pressure. When the wages are excessively high, employers create little profits that cannot make them absorb or create more jobs. In return, this leads to unemployment on a macro-economic level. The major contributors to this unemployment are the civil unions who demand increase of salaries now and then. Government policies that give power to civil unions to demand more and higher salaries are to blame for the creation of real wage unemployment.

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Frictional unemployment

Layard & Nickell (2005) define frictional unemployment as “voluntary unemployment that is associated with the normal turnover of labor” thus creating friction of movement as people leave their jobs to search for the new ones (Layard & Nickell, 2005). As people leave their jobs to find news ones or other activities, they leave a gap which is taken by those looking for a job. People may leave their old jobs voluntarily to find better payment or better working conditions and because of the retirement effect. In between the process of looking for other new occupation, the individuals are rendered unemployment. The frictional employment can also increase levels of unemployment since the numbers of jobs left vacant are not always filled up. At times, frictional employment may be involuntarily, especially in the case where a company closes down its companies, leaving the employees to search for the new jobs. Government should address this issue by introducing a policy of making companies insure their employees against the risk of loosing jobs due to the company failure.

Cyclical unemployment

Just as the name sounds cyclical unemployment it is dependent on the cycles of the factors that contribute to employment, mainly the downturns and upturns of the business cycle. This unemployment traces it roots from the drop in consumer demand for services and products. In return companies revenue drop and as a measure of ensuring that the cost of production is lowered to maximize profits, companies tend to lay off employees. During this lay off, majority of individuals are unemployed. The cost of this unemployment is usually high, as the government has to aid the unemployed. At the same time, the GDP of the country drops as fewer consumers spending reflects lower GDP. For this unemployment, the government can intervene by lowering direct taxes and sales taxes. This will ensure that instead of employers laying off employees to keep the cost of production low, they will depend on reduced taxes of operating the business.

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Geographical unemployment

This unemployment is focused on a certain region depending on age, skills, gender and the economy. Different people with different skills rate of employment are dependent on their diversity and skills matching the market demands of the area. For, example, different regions have built up different economic bases with different occupational profiles. The two main regions illustrated in geographical unemployment are urban and rural areas. As expected, the two different areas have different needs and opportunities for employment. Grants and stimulus is the ideal way to approach the unemployment in both regions. For example, in the rural areas, the basic employment platforms are farming, and the government can facilitate employment in the rural areas by providing farming resources and equipment. This in return would reduce rural urban migration as people will concentrate on the jobs within their regions.

Structural unemployment

Structural unemployment is as a result of collapse of all factors that are necessary in employment creation. This is a permanent involuntary unemployment, often associated with shift in the economy wellness making it difficult for certain sections of the population to find employment. Franz (1992) observes that structural unemployment is a gap between job vacancies and employment especially when there are no or minimal technological advances in the industry. As the population grows, so should the employment vacancies, and when this does not happen, a large number of the population are left unemployed. Perhaps the gap is created as a result of poor government policies in approach to matching availability of jobs concerning the skills height of the unemployed in the society. Structural unemployment is the most common unemployment form as it is a long-term disaster unless the government intervenes with policies aimed at creating more jobs for the society in regard with their skills. This can also be approached through training individuals with the right skills for the market.

Casual unemployment

Casual employment amounts to where employees have an arrangement with the employer to work on an hourly basis or when job is available. On the other hand, casual unemployment amounts to the short-term gaps between the casual employments. For example, if an individual is employed on a casual basis two days a week, the gap between the days the individual gets employed is the casual unemployment period. The contract workers are also in this category of unemployment disaster. Others major amount of people in this unemployment are the unskilled workers at construction sites and farms. Casual unemployment does not rise from the government policies, but from the market forces and needs. For example, there are certain jobs that require casual employment only, but the government can intervene by increasing the minimum wage for casual employment so that the employers prefer employing people on a permanent basis.


There are a number of policies that the government can make towards eliminating unemployment. However, it all depends on the employee and employer innovations aimed at creating more job opportunities. The government, however, has the role of creating a conducive environment for the innovative approaches to take place. This is perhaps through lowering time and charges of coming up with structure for creating more jobs. The government can also offer incentives to companies or individuals who work towards innovation or projects that can guarantee mass employment. On the same note, the government, through the curriculum should shape people with the right skills that will help them fit in the available job market. Of late, the approach to the employment has changed from being employed to self-employment.

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