If labor market phenomena are interpreted from an allocational point of view, where individuals differing in levels of various capabilities have to be matched with jobs differing in job requirements, education can be seen as an intermediary institution affecting the capability endowment of individuals upon entering the labor market. Vertical Sorting is a situation where initially abler individuals take longer educations. Horizontal Sorting is a situation where the selected type of education equals the individual's type of capability endowment. Conditions for Vertical and Horizontal Sorting are studied, both in an open smooth labor market, and in a labor market with constraints on job choice. The conclusion is drawn that both Vertical and Horizontal Sorting work out to increase already existing inequalities between individuals. Also, even in a perfect labor market, rates of return to education will only be equalized within particular segments of the curriculum (and capability) space, but not across such segments. (Four graphs illustrate the discussion. Contains 28 references.) (Author)