Inflation causing increased interest in side gigs: Analyst

Bankrate Senior Industry Analyst Ted Rossman joins Yahoo Finance Live to discuss the state of side hustles, the impact of inflation, and the gender pay gap.

Video Transcript

RACHELLE AKUFFO: Well, under the weight of inflation, Americans are turning to side hustles to help make ends meet. A new report out from Bankrate reveals nearly two in five US adults have a side hustle, with younger generations more likely to seek out another source of income.

On average, side hustlers bring in $810 per month, and many use that second source of income, just to stay afloat financially. Ted Rossman, Bankrate's senior industry analyst joins me now to dive deeper into the state of the side hustle. Good to see you, Ted.

I mean, this is interesting because when we first thought of side hustles, it was something temporary, to get you through a rough patch or to perhaps help you with a savings goal. But now you're looking at 44% of those with a side hustle believe that they're always going to need one. What changed?

TED ROSSMAN: I think this really shows some underlying weakness in the job market. Because on the face of it, the job market is really strong. The unemployment rate is the lowest in more than 50 years. The problem, though, of course, is inflation. And a lot of people are finding that just one income stream is not enough.

And the most common use of this side hustle money is just to get by, which I think is kind of a sad reality. It's admirable that people are putting in the extra time and effort, but they're not really getting ahead. I also think there may be some element of full-time gig workers or full-time freelancers. People who are cobbling together different income streams. Some of that may not be captured entirely by the traditional job metrics.

RACHELLE AKUFFO: So to that point then, how much does this complicate when you factor in some of these that are full-time side hustles versus a side plus or full-time, when you're trying to really figure out how healthy the labor market actually is?

TED ROSSMAN: I think it really showcases inequality and this K-shaped economy that there are major differences in terms of how different groups are experiencing things. Certainly lower income households have been hit harder by inflation because they have less money to go around. And their budget was mostly necessities, to begin with.

Lower and middle income brackets have mostly or entirely spent that extra savings that they accumulated during the pandemic. Women are another group that stand out. We know, unfortunately, about the gender pay gap. That actually extends to side hustles as well, by the way. The average male side hustler is bringing in about $1,000 a month, whereas it's about 600 for women.

And then finally Gen-Xers are another group that stand out in our research as feeling, especially strained these days. I think a lot of that has to do with being the sandwich generation and being squeezed between older parents supporting their own kids at the same time, maybe starting to see the finish line with respect to retirement and feeling like they're not fully prepared. So that's another group that seems to be experiencing some strain, unfortunately.

RACHELLE AKUFFO: And so then, when we look at the most popular side hustles, we know that when people think of side hustles, you think your Uber, your Lyft. You're thinking rideshare, you're thinking delivery services, Amazon drivers. You also have Airbnb, virtual assistants, and, of course, the classic that a lot of us started on, babysitting as well. Which ones are the most lucrative in this environment?

TED ROSSMAN: It's actually remarkably fragmented. When we've asked about this, we found that very few side hustles cracked double digits. And there really is no clear majority. I think it goes to show that people are creative, they have lots of different interests and income streams.

A few that bubbled to the top. For women, it tended to be childcare and crafts. For men, it was more along the lines of landscaping and home repair, and things like that. But really across the board, a lot of different things, a lot of people are being creative. I would like to see more people doing a side hustle that's a passion project.

We found only about one in five are doing that. I think that could be a great way to keep your hand in something that you're interested in, but it's not your main income stream. But maybe it could become that down the road. But actually, what we really found was that most people are doing this because they have to, and the money is going to day-to-day expenses.

RACHELLE AKUFFO: And you noted that while people are working harder, they're not necessarily getting ahead. And you mentioned the divide between men and women in terms of how much they're getting. But also-- there's also data in there talking about how they're spending. Men putting more of that into savings. Whereas for women, they're putting that more into the cost of living as well. Why do you think we're seeing that bifurcation?

TED ROSSMAN: I think that showcases the gender pay gap as well. And women need this extra money more often just to get by. That was a trend that we did see across the board to across a number of demographic groups. It really surprises me. Because on the face of it, the job market's been really strong. The unemployment rate is the lowest in more than a half century and wage growth has been pretty good.

But inflation has been higher in many respects. And I think that's really a key theme here. I would love to see people side hustling to get ahead and ping down debt, especially high interest credit card debt or saving more, investing more, having extra money for vacations and fun things.

But really what we found is that people need the extra money just to make ends meet. And I think that really is an unheralded story, I think. Because on the face of it, the job market is very strong. I actually worry what could happen moving forward? That if this is the situation with an unemployment rate of 3.4%, what if that goes to 4.5% or 5.5%? I mean, it wouldn't take a giant crisis. I'm not talking about 10% plus. I think even at these current levels, a lot of people feel like one income stream is just not enough.

RACHELLE AKUFFO: We hope that doesn't become the new normal, indeed. Thank you for breaking all that down for us. Ted Rossman, Bankrate senior industry analyst, for joining me this morning.