Previous research suggests that the ongoing educational expansion is a negative development for early school leavers (ESLrs) in the European labour market, since it increases the level and educational attainment of their competition, and in the worst case creates credential inflation. Findings from the 2005 cross-sectional EU-SILC data show, however, that the negative effect of early school leaving on income is reduced by educational inclusiveness at the country level. The explanation, it is said, is that educational expansion decreases the influence of a disadvantaged family background, which accounts for the net interacting effect of educational inclusiveness itself. Results from two-level hierarchical analyses indicate that the influence of family background is indeed conditional upon the level of educational inclusiveness at country level. This is true for all but one of the indicators of family background included in this article. (Contains 6 figures, 5 tables and 5 notes.)