Increases in the minimum wage can substantially reduce earnings inequality. To demonstrate this, we combine administrative and survey data with an equilibrium model of the Brazilian labor market. We find that a 128 percent increase in the real minimum wage in Brazil between 1996 and 2018 had far-reaching spillover effects on wages higher up in the distribution. The increased minimum wage accounts for 45 percent of a large fall in earnings inequality over this period. At the same time, the effects of the minimum wage on employment and output are muted by reallocation of workers toward more productive firms.. (JEL D31, E23, E24, J31, J38, O15)

We use administrative US matched employer-employee data merged with detailed information on individuals' academic records to assess the extent to which returns to education are mediated by the sorting of workers across firms. We present three results. First, we confirm findings in the earlier literature of large pay differences across higher education degrees. Second, we show that up to one quarter of pay premiums for higher degrees are explained by between-firm pay differences. Third, higher degrees are associated with greater representation at the best-paying firms. We conclude that employer heterogeneity is an important factor in mediating the returns to education.