The rise of the side hustle

The writer is chief economist at UBS Global Wealth Management, a small-scale farmer and author of ‘Profit and Prejudice: The Luddites of the Fourth Industrial Revolution’

It is the time of year when retailers strain every nerve and sinew to persuade consumers to spend money they do not have on things they do not need.

This is hardly a new phenomenon. From the earliest days of the first industrial revolution, advertising has expanded in sync with the rise of mass production. What is new are the mechanisms for advertising.

WPP Media’s mid-year analysis suggested that in 2025, creator-generated content would receive about the same share of the world’s advertising revenue as the combined efforts of the global radio and newspaper industries.

Advertising revenues are not flowing to traditional platforms. To get a message across in the modern world, you need to find a 15-year-old with a smartphone and a nice set of dance moves.

Some influencers can make a living from the revenues they receive. For many influencers, the revenue is more likely to be a supplementary income. This is a broad trend. More musicians have been able to make some money in a world with streaming services because record label executives no longer gatekeep the industry. The amount of money earned is below the level of record label stars and generally insufficient to live off — but it is an additional income stream.

Online marketplaces abound, allowing anyone who thinks they have something to sell to find a customer without any of the expense of having to rent a physical shop. Airbnb allows people to make money from little-used living space. Welcome to the world of the side hustle.

The economic impact of this is difficult to discern. Much of the world’s economic data seems to be trying to apply the social norms of the 1920s to the 2020s. Search where you will, the job of “social media influencer” does not appear in economies’ labour force surveys. The side hustle has economic value, but the work is rarely recognised. (A household survey might pick up some of this, but even that is doubtful.)

This failure to recognise work being done might explain the modern tendency to under-report economic growth data. The global economy is almost always performing better than first thought. Some economies may be more prone to this problem than others. The increasing dominance of online retail in economies such as the UK and South Korea eases the rise of the side hustle. Once consumers have become accustomed to spending online, the hustler has access to a huge market with minimal fixed costs. Economic data focusing on large stores rather than small online retailers will under-report consumer spending and the value of the retail sector.

The rise of the side hustle also raises questions about the fetishisation of productivity by politicians. If the more easily measured output of a side hustle is counted but the labour input is not, productivity erroneously increases in leaps and bounds. Working a side hustle might actually be less productive than conventional work, but, even so, is that automatically a bad thing? A lot of side hustles originate in people doing things they enjoy. The economic value of creating a podcast may be incidental — some people just delight in giving the world the benefit of their opinions (and some of those people like me are called “economists”).

The rise of the side hustle may also create a fiscal issue. In 2023, the UK’s HM Revenue & Customs attempted an old-school version of sliding into the DMs of social media influencers (they sent “nudge letters”). The aim was to remind this group that they were liable for tax. This year, there is the “Help for hustles” campaign with similar objectives. How to tax the side hustle is a growing problem for many fiscal authorities.

Chasing large numbers of sole proprietors for tax payments is not necessarily very efficient. As well as higher collection costs, switching activity from larger companies to side-hustle operators may also reduce the pool of taxable income. Sole proprietors often have a tax exemption for some part of their earned income. The rationale for these exemptions is not dissimilar to exempting imports of “small packages” from trade taxes — it takes a lot of effort to collect large multiples of small amounts of money. But as with the rethinking of small package tariff exemptions, fiscal authorities might have to reassess the tax-free allowances of the side hustle.

As technology breaks down barriers to entry in different parts of the economy, people will find new ways to earn money. Statisticians and tax collectors need to learn how to hustle, as this trend is enduring.