As artificial-intelligence (AI) systems become more capable, their potential labor-market effects may aggravate inequality and by extension undermine democratic governance. Moreover, the interrelationship between democracy and inequality may trigger a feedback loop, whereby increases in inequality undermine democracy, which in turn lead to policies that further increase inequality, giving rise to multiplier effects. In the short term, policies to mitigate AI-induced inequality include steering the direction of advances in AI to enhance human-AI collaboration, strengthening worker power and agency, and adjusting tax codes to not incentivize automating human labor. In the longer term, these policies include distributing the surplus generated by AI and taking measures against the adverse effects of market concentration in the AI industry. Moreover, policies that protect and strengthen democratic processes may lead to virtuous multiplier effects by reducing inequality. We hope that with thoughtful governance societies can harness AI’s benefits while ensuring broadly shared prosperity. However, policymakers must act swiftly given AI’s rapid development.