The Economics of Hemlines and Cleavages

by Teodorico T. Haresco, Jr.

Entreprenomists always look for informal measures to validate business trends, like lunches with industry experts, mentors, and the Internet. In 1926, an economist named George Taylor posited the Hemline index theory, that hemlines rise or fall according to the Dow Jones Industrial Average (DJIA).

History seemed to support it: Hemlines dropped post the 1929 Depression, and, while briefly rising in the 1930s, stayed low through the 1940s. The 1960s saw higher hemlines and scoop necks, amidst bullish times. With 1970s recession threats from Vietnam, Watergate, and the Oil Crisis, longer skirts appeared. Hemlines and Mr. Jones’ enticing measure of economic trends may have basis.

Economics rationalizing those unpredictable aspects of woman’s fashion – trends, preferences, and tastes – is hard to define. No wonder then that unofficial “pop-explanations” arise, often with surprising accuracy: like necklines and hemlines. And because fashion is literally, close to our breasts, industry trends thus mirror economic trends.

Darwin at Work in Fashion

The rationale behind the hemline theory: if the economic mood is good, people are also optimistic and this is reflected through dress. Conversely, a mood of conservativeness prevails in tough economic times, and austerity forces a disposable income shift to less frivolous goods. In dress, more practical styles are favored, and so hemlines drop.

More than that, I dare say that low neckline and a high hemline betray a woman’s optimistic mindset, one that, with an enticing hint of forbidden geography, indicates openness to dealing with men; incidentally underscoring a Darwinistic example of using the shortest dress to ensnare the best-fit, male.

Speaking of which, it’s tough for the male. For the coming year, as household incomes are eroded and the increasing debt to income ratios edge him closer to delinquency / default, lean times force simpler lifestyles, and a smaller budget for the missus’ happiness.

Yet the collective dread of the Luzon-based TAKUSA (Takot sa Asawa) gang or in Panay, the AWA (“Aprid” of Wife Association), from being unable to produce the promised handbag during austere times, might be unfounded. A simple flower, or a personalized ring tone – creativity compensating for monetary – might do trick. Probably not.


The measure is apt because there is nothing random about fashion, and a closer look will reveal a calculated science. Catwalk models reed-thin, omelet-chested, and wear scary makeup so that one notices the dress, not the wearer. One of marketing’s oldest tricks in creating the “latest” line is embellishment. Adding Bling, a new color, or a huge logo is the easiest way to extend the brand’s 25% premium. If it seems insidious, you can drop the picket sign, because everyone does it. Notice how last year’s Range Rover looks like this year’s Range Rover, except for the shiny new lights? You get the picture.

Price is still a factor, but ultra-fashion brands escape recession due to the ultimate benefit of ambiance and volume manipulation: The elusive, market “g-spot”, a “sweet-spot” of optimal profit. Limited quantities coupled with service personalization reinforce Louis Vuitton’s “exclusivity,” for example, and helps justify the exorbitance of what is essentially, a checkered brown leather sack.

Youngish Moguls may have less to cheer about. Their mistresses or girlfriends or lovers behave differently; actually stepping-up their spending to highlight their station above the bourgeoisie. It may belie a soothing psychology that says, “we breed, apart.” It isn’t crass, its human nature. It also justifies, in spite of a global economy threatened by US$200 per barrel oil and a food crunch, Hermes’ Birkin Porosus Croc with Pave Diamonds. Price? US$220,000 – for the “fittest and the best”.

In recession, consumer spending – one traditional growth driver and economic gauge – bottoms out. Also, the two-tier economy has resurfaced in developed countries; and even in the US, not since the 1920s have Americans experienced such inequalities of income. The first hit by this is the mid-range luxury goods sector, like Cavalli and Escada, and stores like Saks and Bloomingdale’s. Last Christmas season 2007, these noted that consumer spending was at a five-year low.

NYSE luxury stock valuations are just 10 times their 2008 projected earnings per share compared to 14, last January 2007. Should these stocks fall some 30% more, consumer fashion as a major US economic indicator will formally usher a recession.

HEMLINES 2009/2010

So will hemlines be rising or falling in 2010? Based on historical and current conditions, and Futures Market movements, I’ll put my money where my tongue is: a gradual movement towards the knees and a tightening of the skirt. This reflects a bearish US; a neutral EEC; a moderately bullish mid-East, South America, Australia, and South East Asia; and China and India’s definitely “up” economies. I say gradual because the US consumers (World’s No.1 Economy) can hardly afford an abrupt wardrobe change, again reflecting its slow economic slide. Will June 2010’s hemlines show ankles, or barely covered knees? Will the emerging markets’ higher income ladies be showing more cleavage?

Fashion Silhouettes rise and fall, to get the maximum utility – Attractiveness – adjusted for risk.

Either way, I think us guys are going to enjoy finding out.