Unemployment has been shown to have wide ranging effects on physical and mental health. This review looks to clarify the relationship between unemployment and mental illness specifically, in terms of establishing causality, effect size and moderating factors. The current rational for research combines an etiological approach and interest in the social causation of disease with past work from a social psychological perspective. For this review, PsychInfo, Medline and Embase databases were searched between the years of 1970 and 2011, for prospective studies that include unemployment and mental illness terms. 10 studies were found which matched the inclusion criteria. Studies were included if they studied the long term unemployed, defined the age and gender of their study population, defined their outcome measurements in medical terms, and followed a population prospectively over time. Overall unemployment did precede mental illness; however the exact effect size is unclear. A quantitative meta-analysis was not conducted due to the variability in study design. The discussion tries to point to methodological and theoretical limitations that affect investigations into unemployment and mental illness. It concludes that the work has so far been skewed by individual biases, and that there needs to be wider collaboration between the social sciences and psychiatry.