The present study examines whether and to what extent welfare-family policies are likely to affect earnings inequality between economically active men and women. Using hierarchical linear models, we combine individual-level variables (obtained from the Luxembourg Income Study) with country level data (obtained from secondary sources) to evaluate the net effects of welfare family policies on gender earnings inequality across 20 industrialized countries. The analysis reveals that net of individual-level characteristics, gender-earnings disparities are likely to be less pronounced in states characterized by developed welfare-family policies. However, when differences in the earnings structure across countries are controlled and eliminated, we find that family policies do not exert a significant net effect on earnings disparities between men and women. The apparent insignificant effect is a result of two opposite effects that offset one another. Specifically, the narrowing effect of family policy on gender earnings inequality is offset by the opposite effect of gender based occupational segregation. These findings clearly expose the unintended implications of 'protective' family policies, namely, a more gender segregated labor market, and its detrimental implications for earnings inequality between men and women. The contradictory effects of welfare-state policies on gender earnings inequality are discussed and evaluated in light of sociological theories on the role of welfare policies in contemporary societies.