This paper examines the relationship between schizophrenia and employment. While most other studies have used cross-sectional data to estimate this relationship, we use longitudinal register data and show the development in the employment rate of people with schizophrenia 15 years before the first admission to a psychiatric hospital until 10 years after this admission. We find a considerable drop in the employment rate for people with schizophrenia six years before the first hospitalization, and the employment rate stabilizes at 18 % after the first admission. As family and neighbourhood environment can be important factors in the development of mental illnesses and labour market outcomes, we use sibling fixed effects to estimate the relationship between schizophrenia and employment. The difference in the employment rate in 2007 for the siblings with and without schizophrenia is estimated at 67 %. This difference is reduced to 56 % when we include control variables such as marital status, educational achievement and work experience but remain unchanged when we apply a sibling fixed effect approach which controls for unobserved family specific characteristics that the siblings share.