This paper uses two-stage instrumental variables methods to examine whether unemployment affects alcohol use and symptoms of dependence, and if so, in which direction. Data were obtained from the 1988 National Health Interview Survey. The outcomes examined were average daily consumption during the previous two weeks and a summary measure of the number of symptoms related to alcohol dependence during the previous year. After eliminating potential bias due to reverse causality, evidence was found that non-employment significantly reduces both alcohol consumption and dependence symptoms, probably due to an income effect. Involuntary unemployment had a mixed effect-job loss increased the consumption of alcohol in the overall sample but reduced dependence symptoms among single respondents. Studies of the impact of alcohol use on economic outcomes should take potential reverse causality into account.