"Ze leven niet."
Translation:They are not living.
You can think of leven as: to exist, to be alive and wonen as: to dwell, to reside.
When you live somewhere or in something (e.g. country or house) you use wonen.
When you live (are alive) you use leven.
Typically to live in the definition of wonen is not used without indicating where or in what you live. Hence, zij wonen niet is not a complete sentence.
Would this be how Dutch speakers commonly say 'They are dead' too, or is this just a literal translation of 'They are not living'?
This is just a literal translation, "they are dead" would be "ze zijn dood".
I have the same question. Is it figurative? For example, if they drink cheap wine, and a wine enthusiast may suggest that they are not living (without quality wine).
Ze leven niet echt = they're not really living (not like zombies but not fully appreciating life). However, it seems very judgemental;-)