Paid work is related to health in complex ways, posing both risks and benefits. Unemployment is associated with poor health, but some jobs may still be worse than no job at all. This research investigates that possibility. We used cross-sectional survey data from Australians aged 40-44 (N = 2497). Health measures were depression, physical health, self-rated health, and general practitioner visits. Employees were classified according to their job quality (strain, perceived job insecurity and marketability). Employee health was compared to people who were unemployed, and to people who were not in the labour force. We found that unemployed people reported worse health when compared to all employees. However, distinguishing in terms of employee's job quality revealed a more complex pattern. Poor quality jobs (characterized by insecurity, low marketability and job strain) were associated with worse health when compared to jobs with fewer or no stressors. Furthermore, people in jobs with three or more of the psychosocial stressors report health that is no better than the unemployed. In conclusion, paid work confers health benefits, but poor quality jobs which combine several psychosocial stressors could be as bad for health as being unemployed. Thus, workplace and industrial relations policies that diminish worker autonomy and security may generate short-term economic gains, but place longer-term burdens on the health of employees and the health-care system.