Income diversification is not just the future: it is now

An overview of the potential and benefits of income diversification and its impact on tomorrow's workers.

Pauline Kletti
Pauline Kletti
May 3, 2022
5 min read
Income diversification is not just the future: it is now

As the “self-employed status" is booming, younger generations have embraced the changes in employment that have come with it. More and more, new technologies and platforms require task-based and freelancer missions—pushing workers to pursue income diversification and entrepreneurship. Rollee’s solutions are helping to bridge this change by making it easier for financial institutions to evaluate customers' income in this new age of employment. 

What is income diversification?

Diversifying one’s income means pulling earnings from several sources rather than from just one job. 

In recent years, more and more workers have joined the gig economy by becoming drivers and couriers for ride-sharing and food delivery services. Many of these “light entrepreneurs” continue to work other full and part-time jobs, offering them work flexibility while providing two or more streams of income. 

Today’s digital world gives workers countless opportunities for side hustles. In addition to task-based work, workers can increase their opportunities by using several platforms instead of just one. One can be a driver in the morning, a teacher in the afternoon and working on a side project in the evening, providing the right service at the right time and optimizing one’s income and time.

Why is it happening?

Traditional employer-employee work relationships remain uncertain as new technologies and trends reshape the workplace. Full-time workers aspire to more flexibility & ownership of their work. The pandemic has been a trigger for many employees to focus on their expertise and aspirations, instead of being stuck in a 9-5 job. 

This newly created labor market breaks down traditional full-time jobs into targeted tasks and projects.  Studies have shown that up to 19,2 million Europeans now identify as independent workers, 4,4 millions being based in the UK.

Millennials and future generations

The strained financial reality for many millennials has also spurred the need for income diversification. Student loan debt, low wages, and a scarcity of work have forced younger generations to modify their job search, seeking innovative and skill-targeted work. This presents a major break from their predecessors who sought stable long-term employment relationships. 

Their financial worry has also given rise to the sharing economy, which prioritizes access over ownership to services and goods. Less and less are younger generations buying homes, cars, or luxury products. Instead, digital natives rely on technology and platforms to source and pool goods—complete with instant access to product information and peer reviews. 

The sharing economy feeds the gig economy by producing more demand for targeted platforms. As a virtuous circle, every platform needs gig workers to keep it running, and every person has a new opportunity to earn additional income thanks to the sharing economies platforms. Income is getting more complex: we are moving from a regular one-time income at the end of the month to several income sources, paid from multiple sources.  

What are the benefits of income diversification?

There are several benefits of having a diversified income. With multiple income, a worker can gain financial security than in a single job. For example, if one of several jobs is cut down, you can still invest your time in other ventures.

Another benefit of having several incomes is the gain of flexible work. A worker can focus on the income that delivers the most at a given time, and flexibly shift to his other activities if the income is stagnating.

The flexibility that comes with diverse income sources leads to a greater choice of investing in the area that will help a worker reach its ideal life: be it investing in a new skill to develop an additional income source, or reaching your financial goals.

Having different income sources (and protecting your income with insurance) allows workers to adapt and continue to provide labor when and where possible. 

All employee benefits can today be provided as well for self-employed workers.

Case studies in the developing world

As developing nations continue to see surges in their economic development, several recent studies have shown a positive correlation between income diversification and poverty mitigation. These studies have shown that a diversified income can help empower families to overcome systemic issues embedded in poverty. Access to food, water, housing, and eventually, education become more realistic as multiple income streams pave the way for a stable livelihood. 

In Niger, A study of over 600 family-run rice farms found that those who earned a non-farming wage were financially better off than those who only farmed or whose self-employment was related strictly to farming

Researchers with the IFPRI (International Food Policy Research Institute) found that the general surge of economic activity in Vietnam since 1990 can be largely traced to income diversification. 

Rollee Solutions

The reality is that task-based, freelance, and on-demand work is here to stay. Continued changes in automation and a need for financial flexibility have pushed us to the point of no return. The new focus is now on how to adapt our current financial and banking systems to account for an economy of freelancers. 

Rollee is working on several solutions to ease the strain between workers, businesses, and banks by creating a network that allows workers to gather and share their employment data easily. The secure network offers businesses a holistic view of a candidate’s professional career and enables them to adopt fairer selection criteria. 

We are excited by the benefits Rollee can bring as we expand our platform to include an even large variety of worker types, from freelance to full-time. 

Click here if you want to find out more about our mission to build the platform for employment data in Europe.