Is It Fair to Earn Passive Income?

May 18th, 2012 by Steve Pavlina

Some people have asked whether it would be sustainable if everyone tried to earn passive income, so let’s get that out of the way before we continue with this passive income series.

I think the supposition here is that certain jobs don’t adapt well to passive income strategies, and therefore certain work is best suited to active income. Let’s suppose that’s true for the sake of argument.

Passive and active income strategies compete in the marketplace. People are free to choose either strategy. Most people choose active income. Why? I think the main reason is that they’ve been socially conditioned to choose this strategy. They probably make this choice without much knowledge of passive income strategies. Schooling, parents, and peers help train most people to chose active income.

Even if a lot more people started earning passive income and fewer people were willing to earn money as active income, I believe the market would adapt without skipping a beat. For critical tasks that could only be performed with ongoing labor, prices would rise, and therefore more people would be willing to perform those tasks.

Presently we have an oversupply of people who are looking for jobs, and we have a shortage of jobs for those people. So is it really wise to keep training more people to look for jobs? No, that would be foolish and will only make the problem worse. It will also cause salaries to drop, lowering people’s standard of living.

I think a better solution is to teach passive income strategies and help some of those people make different choices. Passive income is a great choice in this economy since you won’t need to find a job. In fact, you can actually help to stimulate more job creation.

Passive income has the effect of creating more jobs as well as supporting existing jobs. Whenever I create new passive income streams, I create income for other businesses. These generate revenue that helps cover the salaries of many employees.

Remember that passive income methods involve delivering value to more people than you probably could with an active income strategy. I see no reason to hold back on providing value. You may be providing different forms of value with a passive income strategy, but it’s still a net gain for others if you increase your contribution.

If you license your book to a book publisher and receive passive income in the form of royalties on sales, the publisher may in turn pay people to perform specific jobs to keep their system running, and those employees may receive active income in the form of a salary. Your book deal helps to facilitate this and creates and sustains jobs for others.

Passive and active income strategies are mutually supportive. They are not opposites. I think it’s healthy for both to co-exist.

I don’t personally want a regular job, but I understand that many people do, sometimes desperately so. I may poke fun at the regular job mindset now and then to get people to think about this more consciously and to consider alternatives, but I respect people’s ability to make their own choices.

As for whether it’s fair to earn passive income, I’d say it’s more than fair. It’s downright generous. As I’ve shared in previous posts, passive income tends to be more heavily rewarded (and less taxed) than active income. But passive income strategies can also add a lot of value to the economy, and so it makes sense to reward these strategies more heavily. By helping to create and sustain more jobs for others, you can actually generate significantly more tax revenue than you would if you earned the same amount via active income.

It’s not uncommon for active income earners to think of passive income as a greedy strategy. The irony is that it’s just as easy to regard active income earners as holding back and making a lesser contribution… contributing to just one employer when they could be serving many more people. The truth is that both strategies seek to contribute, just in different ways.

In the next several posts, I’ll cover some specific passive income strategies. I’ll even demonstrate some of these strategies with specific examples from my own business, so you can better understand how they work.

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