Introduced in 2013, shared prosperity by increasing the incomes of the Bottom 40 per cent is one of the World Bank Group’s twin goal.
The other goal is to end extreme poverty for the 1.2 billion people who continue to live with hunger and destitution.
The World Bank defines shared prosperity as the average annual growth in income or consumption of the poorest 40 per cent of Bottom 40 per cent (B40) within each country.
The aim of shared prosperity is to continuously improved well-being, which means the main objective is to increase the income and welfare of the less fortunate.
The shared prosperity goal captures two key elements, economic growth and equity, and it will seek to foster income growth among the bottom 40 percent of a country’s population.
Shared prosperity is measured by annualized growth in average real per capita consumption or income of the bottom 40 per cent of the population in each country.
The bottom 40 per cent are determined by their rank in household per capita income or consumption.
The shared prosperity indicator was proposed as a means to highlight the poorest segments of the population in every country, irrespective of their level of development.
A high level of shared prosperity is an important indicator of inclusion and well-being, and correlates with reductions in poverty and inequality.
In a country where shared prosperity is positive, this indicates the poor are getting richer.
According to the Poverty and Shared Prosperity Report 2020, out of 91 economies for which data was available for 2012-2017, 74 had positive shared prosperity,
This indicates that growth was inclusive and the incomes of the B40 of the population increased.
On the other hand, 53 had a positive shared prosperity premium, meaning that growth benefited the poorest more than the entire population.
The average global shared prosperity (growth in the incomes of the bottom 40 percent) was 2.3 percent for 2012-2017.
Tracking the incomes of the bottom 40 percent of a nation’s population is a departure from how economists have traditionally measured progress.
Before, economists would be focusing on growth in the gross domestic product (GDP) per capita as it was assumed that the growing GDP would trickle down to the poor.
But this is not always the case.
However, the Shared Prosperity Indicator will instead take the direct route of measuring income growth of those less-well off.
Regardless of the economic scene in each country, it is important to monitor the bottom 40 percent of the population in each nation.
By monitoring the bottom 40’s absolute growth and wellbeing, shared prosperity seeks not only to promote social inclusion but also to increase the living standards for all of their citizens and not just the privileged few.
