The purpose of this study is to explore the relationship betweenunemployment and mental health i.e. the problem of mental healthas a possible cause and/or as an effect of unemployment. This isdone in a panel study of men, aged 20-35, single and registered asclients on social security during October 1984.Three questions are stated: (i) if the male clients show similarreactions during unemployment as other unemployed groups despitetheir social and psychiatric problems, (ii) the influence ofmental health as a predisposing factor to unemployment and itsinfluence on reactions and adaptation during unemployment, andfinally (iii) what aspects of mental health are most influentialto the reactions. The men were interviewed on two occasions during1985 and 1986. The sample consists of 100 men, and 86 wereinterviewed twice. Three indicators of mental health are used:psychological well-being as an indicator of current mental healthand measured by the GHQ on both occasions. General mental healthwas rated using the HSRS after the second interview. A diagnosticevaluation of personality organization was made after the secondinterview as a measure of relatively enduring aspects of mentalhealth. Three levels were used; neurotic, borderline andpsychotic. Both quantitative and qualitative data were used in theanalyses.Results suggested that the clients on the whole showed similarreactions to unemployment and re-employment as other groups ofunemployed. The relationship between employment status change andwell-being was, however, mediated by general mental health.Results concerning the direction of causality between unemploymentand mental health showed obvious signs of mental health causingunemployment for men on the lowest level of personalityorganization, the psychotic and an increased risk for repeatedunemployment on the borderline level. Reactions to unemploymentwere largely influenced by the importance of having employment foridentity and self, which made reactions to unemployment rathersimilar for the borderline and neurotic levels. However, therewere some tendencies of better adaptation in the neurotic groupand of unemployment being more of a threat to identity for theborderline group. The crucial dimensions, leading to differencesin reactions to unemployment, proved to be identity integrationand level of defence functioning.