This paper provides a quantitative investigation into the effect of new social policy instruments on income inequality. The welfare state, which had played an important role in relieving poverty and income inequality, is now under pressure for reformation due to economic and sociological changes so many new policy instruments are introduced. This paper examine the distributive impact of Active Labour Market Policies (AMLPs) focusing on the relationship between ALMPs and the existing protective welfare institution. This paper uses data from twenty-one OECD countries between 1985 and 2011. The results suggest that an increase in spending on ALMPs is related to a decrease in income inequality, but this relation goes in the opposite direction when the unemployment benefit is based on a targeted or flat-rate system. This result suggests that there is no trade-off between new policy instruments and the traditional welfare state if the traditional welfare state is well-designed.