Unearned income

Unearned income refers to income received by virtue of owning property (known as property income), inheritance, pensions and payments received from public welfare. The three major forms of unearned income based on property ownership are rent, received from the ownership of natural resources; interest, received by virtue of owning financial assets; and profit, received from the ownership of capital equipment. As such, unearned income is often categorized as "passive income".

Unearned income can be discussed from either an economic or accounting perspective, but is more commonly used in economics.

Unearned income is a term in economics that has different meanings and implications depending on the theoretical framework used. To classical economists, with their emphasis on dynamic competition, income not subject to competition are “rents” or unearned income, such as incomes attributable to monopolization or land ownership. According to certain conceptions of the Labor Theory of Value, it may refer to all income that is not a direct result of labor. In a neoclassical frame, it may mean income not attributed to any factor of production. Generally it may be used to refer to windfall profits, such as when population growth increases the value of a plot of land.

Classical political economists, like Adam Smith and John Locke, viewed land as different from other forms of property, since it was not produced by humans. Land ownership, in the sense of political economy, could refer to ownership over any natural phenomena, including air rights, water rights, drilling rights, or spectrum rights. Classicals like John Stuart Mill were also concerned about monopolies, both natural monopolies and artificial monopolies, and didn't consider their incomes to be entirely earned.

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