Two hypotheses were investigated: (1) the causation hypothesis that assumes that unemployment leads to poor mental health and (2) the selection hypothesis that assumes that poor mental health reduces the likelihood of finding a job. A prospective longitudinal design was used in order to study two Dutch samples: 635 college graduates and 767 school-leavers. The causation hypothesis was confirmed for school-leavers but not for college graduates. In addition, as expected, employment and further education increased levels of mental health among school-leavers. The selection hypothesis, that unfortunately could only be studied in the graduate sample, was not confirmed as far as mental health was concerned. However, it appeared that future employment among graduates was predicted by a positive attitude and an active way of dealing with unemployment. Results are interpreted with reference to the favourable Dutch structural and cultural context that existed at the time the research was conducted. In addition, the role of proactivity is discussed.