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There is virtually universal agreement that the correlation between wages and education is positive in a wide range of countries. In Brazil there has been a very large positive return to schooling, which has been well documented in the literature, although interpretation of this correlation remains a subject of debate. In addition, the estimated returns to education in the labour market increase with the level of schooling. This chapter focuses on the relationship between wages and schooling in the urban Brazilian labour market, taking into account other factors that also affect wages, such as parents' education, gender, age and race. The effect of education on both wage and type of employment is neither linear nor smooth. Returns to post-primary schooling tend to be far higher than returns to primary schooling, providing empirical support for the policy recommendation that high priority be given to expansion of secondary schooling, and to improvement of quality of primary schools to insure a larger pool of potential secondary enrolments.