China’s urban labor markets underwent dramatic changes in the late 1990s. This chapter focuses on education as a determinant of urban residents’ labor market outcomes in this turbulent period. Data from a 1999-2000 survey of urban workers are analyzed to examine the role of education in preventing lay-offs, obtaining re-employment, and determining earnings. The analysis reveals that by the late 1990s education had become a key factor in successful labor market outcomes. More educated workers were less likely to be laid off, more likely to find new employment if laid off, and were better paid. The education of workers who experienced a lay-off and then found new employment was rewarded more highly in terms of earnings than that of workers who managed to avoid lay-off.