LISEP Ludwig Institute for Shared Economic Prosperity

LISEP’s Shared Economic Prosperity (SEP) Measure uncovers how economic growth reaches middle- and working-class Americans by answering two fundamental questions: How should national income be distributed to ensure all households have the opportunity to meet a basic standard of living? And how is it actually being distributed?

While steady economic growth, measured by Gross Domestic Product (GDP), has been touted as the engine of prosperity, the reality for many is in stark contrast. Despite sustained GDP growth for over 20 years, many Americans haven’t seen their incomes improve — some have even experienced a decline.

By focusing on the distribution of income after taxes and transfers and cost of living, the SEP tracks whether economic growth translates into opportunity for all.

The SEP compares two key figures: the target share of income needed by the bottom 60% to achieve a minimal quality of life and the actual share of the nation’s income they received.

By tracking the relationship between these two numbers over time, the SEP reveals the trajectory of economic well-being for low- and middle-income Americans. A narrowing gap means increasing shared prosperity, while a widening gap shows growing disparities and shrinking opportunity.

For an in-depth explanation of the Shared Economic Prosperity Measure, please reference LISEP’s SEP white paper.

Shared Economic Prosperity Measure

The Shared Economic Prosperity (SEP) Measure offers a nuanced view of economic health, analyzing not just the economy’s growth but its distribution and impact on Americans’ ability to achieve a minimal quality of life.

Additional Resources:

Shared Economic Prosperity Measure

Actual Share of Income for the Bottom 60% of Earners vs. Target Share Needed to Achieve MQL

Actual Share of Income for the Bottom 60% of

Earners vs. Target Share Needed to Achieve MQL

Select any point on the chart to see the data for that year.

Despite the nation’s capacity to ensure a minimal quality of life for all households, the actual share of income received by the bottom 60% reveals a stark disparity. Fluctuations in the actual share reflect the impact of external factors such as government policies and economic events, while changes in the target share reflect the economy’s evolving ability to meet basic needs. Even seemingly small percentage fluctuations in this actual share translate to significant, tangible impacts on families’ ability to afford basic necessities. Progress toward closing this gap and achieving shared prosperity has been painfully slow, relying primarily on overall economic growth outpacing MQL — thus reducing the target share — rather than increasing the actual share received by the bottom 60%. At the current rate, it will take over two centuries to achieve true shared prosperity.

Difference Between Household Income and Cost of Living

Shortfall Between Household

Income and Cost of Living

Select any point on the chart to see the data for that year.

The persistent gap between income and expenses reveals a troubling trend: middle- and working-class households have consistently struggled to afford basic necessities, let alone pursue economic opportunity. This struggle is particularly acute for the bottom 20%, who often experience extreme economic hardship. Even those slightly higher up the income ladder, in the 40th–60th percentiles, are barely getting by, with little hope for advancement.

Disposable Income Growth

Change Since 2001*

Select any point on the chart to see the data for that year.

Rates of change for the bottom 60% of earners are deflated using the MQL. Rates for the top 40% of earners and all-population average are deflated using the Consumer Price Index.

While the overall economy has grown since 2001, that growth hasn’t been shared equitably. The bottom 60% of households have seen their incomes grow three times more slowly than the top 40%, a disparity masked by aggregate growth metrics like GDP. These metrics disproportionately reflect the experiences of higher-income households, making them unreliable indicators of prosperity, particularly for low- and moderate-income households.

Difference Between Household Income and Cost of Living

Share of After-tax National Income

Per Adult, Bottom 60% vs. Top 20%

Select any point on the chart to see the data for that year.

World Inequality Database (WID.world, retrieved March 5, 2024). Post-tax national income, used here, is income less taxes and adding all transfers and public spending. It differs from disposable income by including collective expenditures (e.g., infrastructure) and individualized in-kind transfers (e.g., Medicaid).

Today, the top 20% of adults earn more than five times the average income of the bottom 60% — a dramatic shift in income distribution over the last four decades. The income share for the bottom 60% has fallen 6.2 percentage points since it peaked in 1976, while the share for the top 20% has risen 8 percentage points over the same period. Despite this stark divide, history shows us that a more equitable distribution is possible, with past periods of shared prosperity suggesting we can build an economy where everyone has the opportunity to achieve a minimal quality of life.

Shared Economic Prosperity Measure

LISEP’s measure of how national income is shared

In 2023, the bottom 60% of U.S. households earned 22.1% of all disposable income — well short of the 39% they would have needed to cover the expenses necessary for well-being, growth, and upward mobility.

Shared Economic Prosperity Measure

LISEP’s measure of how national income is shared

In 2023, the bottom 60% of U.S. households earned 22.1% of all disposable income — well short of the 39% they would have needed to cover the expenses necessary for well-being, growth, and upward mobility.

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