The relationships between unemployment, mental health (care) and medication use among 50–65 year-old men (N = 11,789) and women (N = 15,118) are studied in Europe. Inspired by the social norm theory of unemployment, the relevance of regional unemployment levels and workplace closure are explored, using multilevel analyses of data from the Survey of Health, Ageing and Retirement. In line with the social norm theory, the results show that – only for men – displaced workers are less depressed and use less medication than the non-displaced unemployed. However, they report more depressive symptoms than the employed, which supports the causal effect of unemployment on mental health. Non-displaced unemployed men are also more likely to consume medication than the displaced unemployed. In addition, using regional unemployment as a proxy for the social norm of unemployment can be questioned when studying mental health effects, as it seems to be a stronger measurement of labour market conditions than of the social norm of unemployment, especially during a recession.