85. The economic idea in a brief

Look-good indulgences

It is a universal fact that economic downturn shrinks individual consumption while encouraging saving decisions. However, noticeable are the unconventional and somewhat weird economic indicators that follow such income effects. Houses remain unsold and luxury cars overstay in the showrooms, but women continue to venture out to substitute their expensive purchases with affordable indulgences. No wonder, despite all odds the cosmetic industry looks up when everything else is down. 

Economic history repeated itself when lipstick sales in the US had touched pre-pandemic level of $34 million during the Covid lockdown, aligning with a 25 per cent growth in cosmetics during the Great Depression of 1929-33. This was so when there was a decrease in industrial production by 50 per cent. Even during the recession of 2008, the sales of a global cosmetic brand had registered an increase of over 5 per cent and during the economic downturn in 2019, the cosmetic industry saw a 116 per cent surge in China. 

Are women cognitively wired to comfort themselves with affordable look-good luxury during social and economic calamities? Seemingly, they are. Even following the 9/11 terror attacks, lipstick sales had increased by about 11 per cent in the second half of 2001 compared to the first half. Such a consistent trend had led experts to conclude that the sales of lipstick were inversely related to the general health of the economy, and consequently termed it the ‘Lipstick Index'.

'The Lipstick Index' is certainly a manifestation of the income effect but not everybody buys its relevance. Consumers, especially women, spend their discretionary income on smaller luxury items during economic duress. However, the rising popularity of other cosmetic staples has given women more choices to kiss the lipstick index goodbye. No wonder, in many countries nail polish, eyeliner and moisturizers have emerged as the new mood-boosting economic indices. 

'The Lipstick Index' may soon be replaced but the concept of the index is still there. Be it an ‘Eyeliner Index’, ‘Mascara Index’, or even a ‘Facemask Index’, the demand for feel-good and look-good products remain a reflection of affordable indulgences when the chips are down, No surprise therefore that demand for luxury hand-soaps, carry-in-bag handwashes, and pretty protective branded masks are on the rise, creating a new normal in the abnormal economic realities of the time. 

Unlike the economists, women have had their own way of reflecting upon the state of the economy. Way back in the mid-1920s, it was the ‘Hemline Index’ which suggested that the lengths of skirts increased in times of crisis, and grew shorter when the economy was booming. In Japan, the ‘Haircut Index’ was in vogue in the past. Japanese women would wear their hair long when the country's economy was doing well and short when there was a slump. Both the indices now seem to be of academic interest but continue to prevail in discussions on the subject.  

...left hanging

One wonders if men have nothing to reflect on such matters? They do, but the poor guys have nothing on the shelf to indulge in and consequently end-up bargaining their modesty by refraining from purchasing underwear during economic duress. What a pity? This has helped US Federal Reserve Board Chairman Alan Greenspan to coin the 'Underwear Index' in 1970, indicating that its upswing reflects economic growth whereas a decline in the sale of underwear proves the opposite. If men hold back from purchasing even an underwear, the economy must be in pretty bad shape. And, that indeed is the case! 

Much to the disliking of mainstream economists, these indices are bound to stay as they represent the state of the present economic downturn. Millions of job losses, surge in digital work culture, online education, and the urgent need of protection from the invisible predator might have induced a completely different form of representation and recovery than we are used to in any standard recession. The ‘Lipstick Index' and the 'Underwear Index' are amusing symbols of our economic stress. Wonder, what new indices might be in store in future? Your guess is as good as mine!