Passive income: The rise of the side hustle culture

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  Quantumrun Foresight
• July 17, 2023

Insight highlights

The rise of the side hustle culture, predominantly led by younger generations seeking to offset economic instability and achieve work-life balance, has brought about significant shifts in work culture and personal finance. This shift is reshaping the labor market, stimulating technological developments, altering consumption patterns, and influencing political and educational landscapes. However, it raises concerns about job insecurity, social isolation, income inequality, and the potential for burnout due to overwork.

Passive income context

The rise in side hustle culture seems to persist beyond the ebb and flow of economic cycles. Although some perceive it as a trend that gained momentum during the COVID-19 pandemic and is likely to wane as the economy stabilizes, the younger generations view stability with skepticism. For them, the world is inherently unpredictable globally, and traditional methods seem less reliable. 

Their wariness towards conventional work blueprints fuels the growth of the gig economy and side hustles. They crave a work-life balance and freedom often lacking in traditional jobs. Despite increasing job openings, their income fails to offset the expenses and debts accumulated during the pandemic. Therefore, a side hustle becomes a necessity to tackle inflationary pressures. 

According to the financial service marketplace LendingTree survey, 44 percent of Americans have established side hustles during inflation surges, a 13 percent increase from 2020. Gen-Z spearheads this trend, with 62 percent initiating side gigs to balance their finances. The survey also reveals that 43 percent require side hustle funds to meet their basic needs and around 70 percent express concern about their financial well-being without a side hustle.

The pandemic may have accelerated the adoption of a side hustle mindset. Still, for many Gen-Z and Millennials, it merely represents an opportunity. Young workers are more ready to challenge their employers and unwilling to tolerate the broken social contract of previous generations. 

Disruptive impact

Side hustle or passive income culture has had transformative long-term impacts on personal finance and work culture. Primarily, it has changed people's relationship with money. The traditional model of working one full-time job and relying on a single source of income is being replaced by a more diversified, resilient income structure. 

The security offered by multiple income streams allows individuals to weather financial crises more effectively. It also creates the possibility for increased financial independence, allowing individuals to invest more, save more, and potentially retire earlier. Furthermore, the growth of side hustles can contribute to a more vibrant, dynamic economy as individuals launch new business ventures and innovate in ways they may not have in traditional employment contexts.

However, the side hustle culture could also lead to overwork and increased stress. As people strive to manage their regular jobs while building and maintaining additional income sources, they may work longer hours, which could lead to burnout. 

This culture could also reflect and exacerbate income inequality. Those with the resources, time, and skills to start side hustles could further increase their wealth, while those lacking in such resources might struggle to keep up. Additionally, the gig economy's growth has raised important questions about worker rights and protections, as many side hustles do not offer the same benefits as traditional employment.

Implications of passive income

Wider implications of passive income may include: 

• A reshaping of the labor market. Traditional full-time jobs may become less prevalent as more people opt for flexibility and control over their work leading to an overall decrease in the demand for 9-5 jobs.
• Increased job insecurity, as people may struggle to maintain a consistent income stream and lack protections such as healthcare and retirement plans.
• A rise in social isolation as the traditional workplace often provides social interaction, which can be lacking for those who work independently.
• Increased spending in sectors that cater to the needs and wants of those with extra disposable income.
• The development of technologies that support side hustles, including platforms that connect freelancers with potential clients, apps that help manage multiple income streams or technologies that facilitate remote work.
• Workers opting to live in less expensive areas, impacting urban and rural demographics.
• Increased demand for regulations to protect workers in the gig economy, influencing political debate and policy.
• An increase in demand for educational programs that teach business skills could lead to a broader cultural emphasis on entrepreneurship.

Questions to consider

• If you have side hustles, what motivated you to have them?
• How can workers balance passive income and job security?