There is little theoretical understanding of why educational inequalities in depression are larger in some countries than in others. The current research tries to fill this gap by focusing on the way in which important labor market processes, specifically upgrading and polarization, affect the relationship between education and depression. Analyses are based on a subsample, aged between 20 and 65, in 26 countries participating in the European Social Survey (N = 56,881) in 2006, 2012, and 2014. The results indicate that educational inequalities are lower the more a country’s labor market is upgraded, and we suggest that this is a consequence of an amelioration of the labor market position of the lower educated. Analysis shows that polarization is related to more educational inequalities in depression for women. However, central mediating processes are not confirmed, and new perspectives on these mechanisms will be discussed.