The hemline index, lipstick effect and the beauty industry’s ties to the economy

By Swazi Mabuza

Economics is one of the most metaphor-filled “sciences” we have. It might be economists’ hope to convert us all into experts, or it might be them admitting the subject can get a little bit confusing and getting ahead of it by always having an easy-to-digest analogy at the ready to explain different economic theories.

Simply put, economic theories explain economic phenomena. These phenomena give us a bit more insight not only into where we are economically, but also where we are going in the future. Thus, predicting future economic trends is a vital and integral part of an economist’s job. These phenomena are a useful tool in analysing how well the economy is doing through different lenses and aspects of life.

Many of these phenomena boil down to who is shopping, what they are buying, and why.

Though women have only been able to get a bank account without a male relative’s permission for less than 70 years in most countries, their impact on the economy has existed for as long as we have had a modern economy. Women have always had enormous purchasing power because they are primary decision-makers in most household purchases. Women typically have more social motives for shopping. While the idea of freedom through consumerism may sound a bit ridiculous today, almost 100 years before women got more financial equality, they could go outside unaccompanied to shop in department stores. Since then, shopping has not only been embedded in our society as an activity suited for women, but has also become a very social activity. This makes it unsurprising to hear that women are responsible for 85% of the US’s spending, for example. In South Africa, buying power lies firmly in the hands of women, with more than 65% being the primary purchasers in their households.

Beyond women’s relatively new opportunity to be financially equal to their male counterparts, gender-based differences in economic behaviour are often due to long-standing cultural gender norms. Considering shopping as a culturally feminine activity makes it impossible not to examine the impact of gender on consumer buying behaviour and what those behaviours reveal about the economy as a whole.

The phrase “women be shopping” is thus not just a silly cliche from sitcoms and stand-up comedy, but also a pretty accurate representation of the reality of consumption worldwide. It’s safe to say that women do a lot of the shopping. It’s unsurprising, then, that two of the most popular economic analogies involve women’s shopping habits during certain economic periods.

The hemline index is a theory that posits that the current preferred length of women’s skirts correlates with current economic conditions, with longer hemlines during economic downturns and shorter hemlines returning during upswings. First proposed by George Taylor in the 20s, the theory notes that women’s skirts tended to have much shorter hemlines when the economy was prospering. Based on this theory, Taylor suggested that skirt hemlines could serve as an economichealth indicator. The Roaring ‘20s and the subsequent Great Depression proved this well, making these periods a textbook example of the hemline index effect. As the economy began to decline in 1929, women abandoned their short flapper dresses for longer, more conservative lengths. This theory continued to prove itself beyond the 30s. A Dutch economist, Marjolein van Baardwijk, analysed data from 1921 to 2009 and found a statistically significant relationship between skirt lengths and stock market performance. Hemlines tended to rise approximately three years before an economic upturn and fall three years before a downturn, according to her findings.

First described by Juliet Schor in her book “The Overspent American” in 1998, the lipstick effect is the tendency for consumers to continue spending on small indulgences during recessions and economic downturns. You don’t need a degree in economics to know that when people have less income, they tend to spend less or opt for cheaper options. Why then do sales of makeup products, particularly lipstick, increase during times of economic downturn? Studies by behavioural economists have shown that women tend to choose more expensive makeup products than usual during these times. Interestingly, studies have also shown that these women opt for cheaper options for things such as mobile phones and computers to afford the more luxurious versions of the makeup they buy. This effect is one of the reasons restaurants and movie theatres typically do well in recessions. Consumers with cash flow problems want to spend money on treating themselves to forget the financial problems they are going through.

Though most critics argue that the hemline index theory is more coincidental than anything, there have been some compelling examples of it in action over the last 20 years. Leading up to the 2008 financial crash, mini miniskirts were quite popular, reflecting positive consumer trends and an upturn in the markets. A shift to much longer hemlines was witnessed post-financial crash, reflecting consumers’ newly conservative and insecure sensibilities. In more recent years post post- COVID-19 pandemic, the economic uncertainties that came with also ushered in a domination of maxi skirts and long dresses on the runways and in everyday wardrobes. However, the rise of fast fashion has made the Hemline Index much less reliable. Still, it remains an interesting lens for examining the ties between the beauty industry and the economy. The lipstick effect continues to show itself in post-pandemic consumer behaviour. Overall, beauty has demonstrated resilience and growth amid the recent economic challenges that began in 2020. Above just lipstick, consumers seeking small “affordable luxuries” are consistently purchasing hair and skincare products to boost their confidence and overall wellbeing. Lip gloss specifically had a surge in popularity around 2024. That year, Vogue forecasted a huge year for gloss, with the hype driven mainly by TikTok trends. This prediction proved accurate with the ‘lip gloss market’ growing by more than 1 billion USD between 2023 and 2024.

Economists will argue over the merits of these two phenomena, but the anecdotal evidence from both points quite clearly shows how fundamentally the beauty industry impacts the economy. With the beauty industry being almost exclusively consumer-driven by women, it’s important to note how women historically haven’t been decision makers or even stakeholders with any real return on investment. It’s not all doom and gloom, of course. Many iconic brands were, and are still, women-run: Estée Lauder, Elizabeth Arden and Mary Kay, just to name a few. Newer brands at the forefront of beauty innovation have also emerged, led by powerful, impactful women founders.

Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.

Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.

If you prefer WhatsApp for updates, sign up to the BizNews channel here.