Jan 25
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The Income Mosaic

By: Deanna Laufer with Caroline Federal | January 25, 2024
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Income has been synonymous with employer income for the majority of working-age Americans over the last 100 years. Most adults work for a living, and the vast majority of those who do work for an employer. But that’s changing. Employer income is playing a less dominant role for Americans as they’ve diversified their income sources into a mosaic of ways to earn money.


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Earned income is dropping while unearned income is rising. In 1995, salaries and wages comprised 76% of American taxpayers’ total income. Twenty-five years later, that number was down to 67% (see Figure 1). What accounts for the difference? A rise in unearned income, predominantly from sources like pensions and IRAs, social security benefits, partnerships and S corporations, and capital gains. While a rising number of retirees can explain much of this shift, it may also reflect a growing dependence on income derived from owning and trading stocks, bonds, and investment property.

The independent workforce is booming. In 2023, Upwork estimated that there were 64 million Americans in the independent workforce, comprising those who are self-employed, freelance, or do gig work either full or part-time.1 At the current rate, half of all working Americans will be part of the independent workforce by 2027.2 Part of what’s driving this momentum is its popularity with younger workers: half of adult Gen Zers freelance, versus 44% of Millennials and just 30% of Gen X.3 And businesses are altering their marketing plans to reflect the growing ranks of independent workers. In 2019 Estee Lauder began allocating 75% of its ad budget to influencers4—a profession that 54% of Millennials and Gen Z say that they would pursue if given the opportunity.5 If ad spends keep shifting like this, more of them may get that opportunity.

Side hustles have caught on. Two in five Americans claim to have one6, including one in five so-called retirees.7 The money-making opportunities are varied and seem to be plentiful. Globally, 4 million people serve as hosts on Airbnb,8 7.5 million sell goods on Etsy,9 half a million pet-sit on Rover,10 and 3 million create content on OnlyFans.11 According to Stripe, those using 50 of the most popular creator platforms have earned over $25 billion in aggregate.12 Another study found that about half of social media creators who kept at it for at least four years earned more than $50k a year.13 Figures like that explain why large numbers of people turn their side hustle into their primary source of income. For example, 35% of women who host online experiences for Airbnb started the gig as a way to replace lost income, but for 23%, it’s now their primary source of livelihood.14

Why Now

Assembled together, the fading dominance of earned income along with the rise of independent work and side gigs are changing the picture of income from a single or dual source model to one represented by a mosaic of new, easy to access, and diversified income streams (see Figure 2). Driving this change is a confluence of turbulent economic conditions, shifting personal motivations, and rapid technological innovations.

The COVID pandemic catalyzed the move to independent work. After 10 million Americans lost their jobs, many picked up part-time, gig work to bolster their finances, just as they did after the Great Recession. But according to benefits startup Stride, 59% of those who transitioned to independent work during the pandemic have no plans to return to employer jobs—that number was 9% in 2016. Millions more in all kinds of professions are considering the switch to independent work, with flexibility and remote work as their primary drivers. This helps explain why a platform like We Are Rosie, which serves independent marketers, grew from 800 members in 2019 to more than 25,000 in 2023.15 In fact, one-third of Americans quitting their jobs are doing so to start their own businesses.16 After years of anemic growth, monthly new business applications jumped from less than 300,000 in 2019 to nearly 465,000 in 2023 as burgeoning entrepreneurs started retail businesses, consulting practices, and other ventures.17

Career goals have shifted. While the pace of resignations has slowed, Gen Z workers are twice as likely as baby boomers to be considering switching jobs.18 What are they looking for? Higher pay and flexible hours are most important. And though the oldest members of Gen Z are just 27, 50% want to start their own businesses, and many already have.19 But they’re not the only generation reassessing their career path. Many Americans are finding the linear adulthood model of learn, work, then retire obsolete and are switching professions mid-career—at age 39, on average. Some may join the independent workforce part-time as they upskill or full-time to chase their new passion. Others are rejecting the notion of life revolving around work. Further, employer jobs may not even be the best pathway to job security and financial stability anymore. Instead, many independent workers find that having multiple clients or gigs gives them greater economic security through a diversified portfolio of income sources that won’t all dry up with a single lay-off.

Platforms connect supply and demand while fostering trust. A big barrier to self-employment is finding clients. Two-sided marketplace platforms like Upwork and Fiverr make it easier for both freelancers and companies by connecting skilled workers and relevant opportunities. They also help simplify matching supply and demand for physical goods through the likes of Airbnb for home-sharing, Swimply for pool sharing, and Boatsetter for yacht sharing. If you’ve got a thing to share, there’s probably a platform to help you do it quickly and easily. These platforms eliminate some of the risk of working for and renting from strangers by offering ratings and reviews. It’s this reputational component that provides confidence to customers hiring independent drivers, pet sitters, plumbers, and babysitters on Uber, Rover, Thumbtack, Care.com and other similar platforms. And platforms also help reduce barriers that have constrained labor force participation by rural residents and those with disabilities. In fact, Upwork finds that 46% of freelancers could not hold a traditional, location-based 9-to-5 job because of personal circumstances and caregiving responsibilities.20

Technology makes it easier to earn money. Why wait two weeks to get paid at a minimum wage job when you can get in your car and make $100 the same afternoon? Almost anyone with a car and driver’s license (and background check) can start earning money with Uber, Lyft, or DoorDash and get paid the same day. In fact, half of Lyft drivers take advantage of its “Express Pay” services which can help them smooth out income volatility or fund unexpected expenses.21 If selling is your game, starting to generate income on Etsy, Poshmark, or your own website can be just as simple. If you create content, Patreon and Ghost allow users to publish and to manage subscribers.

Benefits are more widely available. Because of the Affordable Care Act, all 50 states maintain marketplaces where Americans can buy health insurance directly.22 But since it can still be difficult to navigate through these sites, Stride has helped 3.7 million independent workers understand what subsidies they qualify for and automatically apply them to their insurance purchase. While piecemealing solutions together still isn’t as simple as getting all your benefits from a single employer, the growing portable benefits space provides at least some reassurance to those on the fence about pursuing independent work.

Why It Matters

How, where, and why people earn their incomes will look different in the future. And while it shouldn’t matter how or where people earn money—so long as it’s legal—it does. A mosaic of income sources means more complexity in people’s financial lives, as well as other challenges because:

Today’s financial infrastructure underserves independent workers. Credit scoring, lending models, payroll practices, taxes—they were all designed with the full-time W2 employee in mind. Consider that credit cards, mortgages, rent applications, and even life insurance require easily verifiable and stable income, which can disadvantage independent workers. And if their access to basic financial services is limited, independent workers will almost certainly have a harder time saving for the future and investing for retirement. While standalone products like IRAs are part of the solution, people who include both full-time independent workers as well as those who will build their livelihoods around a mosaic of income sources will require new tools to help simplify their finances and achieve financial stability.

The model for attracting and retaining top talent is changing. We know COVID changed employees’ expectations about workplace flexibility. If not offered acceptable options for when and where they work, more than half of global employees say they would consider quitting, and that figure is even higher for younger employees.23 And as more workers shift to pursuing and managing a mosaic of income sources, employee demands will likely change again. A growing number of employees want more than one full-time remote job, and platform Overemployed helps them stealthily find them. Workers also want the flexibility to pursue their side interests. The 30% of kids who aspire to be YouTubers24 might do so while tinkering with coding or graphic design on the side. Full-time employees and contractors may no longer be the predominant flavor of employees for corporations; instead, they may need to assemble a talent pool that also includes part-time employees, platform freelancers, multiple-employer workers, and those looking for their employer to help start up their side hustle.

AI could upend the creator economy. The 200 million+ earning income from the creator economy or influencing will soon have a new competitor: digital influencers. As we wrote about last July, there is a burgeoning industry of digital influencers that can augment or replace humans while minimizing human unpredictability. One of the most popular, Lil Miquela, sports 3 million Instagram followers and has worked with Prada, Dior, and Calvin Klein. Not just for fashion, Japanese brokerage Nomura hired Imma, a pink-haired digital influencer, to advertise tax-free investment accounts.25 And while digital influencing could threaten creator economy earnings, it also opens more opportunities for pseudonymous creators, such as VTubers, and those who can now more easily alter their personas and images to reach different demographics.

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The opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information. Fidelity and any other third parties mentioned are independent entities and not affiliated. Mentioning them does not suggest a recommendation or endorsement by Fidelity.
1 Freelance Forward 2023. Upwork.
2 Freelancing in America Report 2017. Freelancers Union. and The State of Independence in America 2020. MBO Partners.
3 Freelance Forward 2023. Upwork.
4 https://www.adweek.com/brand-marketing/75-of-estee-lauders-marketing-budget-is-going-to-influencers/
5 The Influencer Report. Morning Consult.
6 "Zapier Report: 40% of Americans Have a Side Hustle in 2022.” Zapier.com
7 "The Great American Jobs Reshuffle.” The Survey Center on American Life.
8 "Women Turn to Hosting on Airbnb, Earning over $600 Million during Pandemic.” Airbnb Newsroom, 1 Mar. 2021.
9 "Etsy, Inc. - Overview - Key Figures.” Investors.etsy.com.
10 "Rover Investor Relations | Rover Group, Inc.” Rover Group, Inc.
11 https://www.businessinsider.com/onlyfans-has-more-than-3-million-creators-global-business-2023-5
12 "The Creator Economy Goes Global.” Stripe.com, 6 Sept. 2023.
13 Staff, Editorial. "Creator Earnings Breakdown, the Creator Economy Today I NeoReach.” NeoReach | Influencer Marketing Platform, 26 May 2021.
14 "Women Turn to Hosting on Airbnb, Earning over $600 Million during Pandemic.” Airbnb Newsroom, 1 Mar. 2021
15 "About We Are Rosie | Redefining How Marketing Works.” We Are Rosie, wearerosie.com/about/.
16 "Why Are Workers Quitting? 1/3 Are Starting Their Own Businesses.” Digital.com.
17 https://www.census.gov/econ/bfs/pdf/bfs_current.pdf
18 https://www.bankrate.com/personal-finance/job-seekers-survey/#likely-to-look
19 Newsroom-AG, Samsung. "Gen Z Is Defining the Future of Work – on Their Own Terms, Reveals Morning Consult & Samsung Survey.” Samsung US Newsroom, 19 Oct. 2023
20 Freelance and the Economy, 2019. Upwork.
21 https://www.nasdaq.com/articles/merging-the-gig-economy-and-fintech-innovations-is-a-game-changer-for-hourly-workers-2021
22 Witters, Dan. "1 in 6 U.S. Workers Stay in Unwanted Job for Health Benefits.” Gallup.com, 6 May 2021.
23 https://www.ey.com/en_us/news/2021/05/more-than-half-of-employees-globally-would-quit-their-jobs-if-not-provided-post-pandemic-flexibility-ey-survey-finds
24 Group, The LEGO. "LEGO Group Kicks off Global Program to Inspire the next Generation of Space Explorers as NASA Celebrates 50 Years of Moon Landing.” www.prnewswire.com, 16 July 2019.
25 https://www.bloomberg.com/news/articles/2023-08-03/nomura-hires-virtual-influencer-imma-to-get-young-japanese-to-invest?embedded-checkout=true
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