By – Niyati Mishra

Abstract:

The Hemline Index is an economic theory that links the lengths of skirts to economic cycles as they occur, in an attempt to link cultural trends to macroeconomic health. It is often dismissed as anecdotal, however, recent studies show the impact of fashion choices on consumer behaviour and economic forecasting. This article evaluates the theory’s role in traditional economic metrics and discusses its potential limitations. 

An Introduction to Economic Forecasting:

Economic forecasting is dependent upon traditional quantitative metrics like GDP growth, inflation, stagnation, unemployment rates, etc. However, the primary limitation of these metrics is that they simply fail to capture shifts in consumer behaviour and spending, as proved by the 2008 financial crisis. In response to this, economists have been exploring non-traditional methods like the Hemline Index, a theory that posits that skirt lengths shorten when we’re going through an economic boom and lengthen when we’re in recession. This idea was first proposed in the 1920’s, and links fashion to collective optimism or pessimism and affects consumer sentiments. Noted by economist George Taylor in the 1920’s– a decade that marked economic and social revolution, the idea behind this is that women, as a representation of their confidence in the economy, naturally feel more confident and therefore, are more drawn to a shorter hemline. He observed that hemlines had risen dramatically in the decade known as the “Roaring Twenties”, and that this coincided with the new peaks of the stock market and technological innovation. This is because women would then be able to flaunt their silk stockings. These short skirts were embodied through flapper dresses, a symbol of freedom and optimism. But as progression was made into the 1930’s, hemlines dropped since the Great Depression sprung over, and economic hardship became a defining character. This was a pattern seen repeating several decades on. The 1960’s trend with miniskirts was in line with the post-war economic boom, and then the subsequent drop in the 1970’s with the oil crisis, along with stagflation.

 These are shifts representative of society’s broader moods, and that fashion is simply an outlet for them to be reflected. However, critics argue that this theory is an oversimplification of societal and cultural dynamics. For example, in the 1980’s the trend of suits, a symbol for corporate interest, coincided with economic growth however had nothing to do with hemline changes, and that the theory is a narrow representation of women’s fashion. Recent studies have tried to test the theory with empirical analysis. One such study was conducted in 2020, where they analysed Google Search trends for “miniskirts” and “maxi skirts”, alongside Croatian GDP data from 2004-2014 to find that shorter skirts were more searched for during increasing economic expansions (pre-2008 and post 2010) and declined during periods of recession (2008-2009). This aligns with the principles of behavioural economics which say where consumer confidence drives spending on items that are non essential. Another unconventional economic theory in support of this is the ‘Lipstick Effect’, which suggests that consumers seek to indulge in smaller items when their budgets are tighter, illustrated from the rising sales of luxury cosmetics during downturns. Another supporting theory is the ‘Men’s Underwear Index’ which shows that basics in apparel are less likely to be sold during recessions because they want to delay this spending. These indicators are therefore, illustrative of everyday ordinary choices, such as fashion, being able to represent economic sentiment. Currently for women, aged 15-25, the miniskirt is the more preferred option, whereas for 25+, women who have financial responsibilities, the longer hemline is preferred. This also shows how age demographics play a role in influencing trends. 

The Unlikely Role of Hemlines in Predicting Prosperity:

Despite the intriguing statistical correlations that can be made, the theory still faces some significant criticisms which undermine its credibility as an economic indicator. At least one that is independent of other supporting external factors. One critique is that hemlines may also just be reflective of revolutionary social movements that came about. For example, the Feminist movement in the 1920’s, where shorter hemlines may just have been a representation of a seasonal trend or women taking upon the liberty to now be able to make free decisions, and this being a mere fashion choice as opposed to an indicator of economic health. Another example is the 2010’s boom of athleisure sales, which aligned with economic recovery but could have just been a result of the trend of wellness culture coming about. This is further complicated by the onset of globalisation as modern fashion trends are shaped by global external phenomena like TikTok, which are beyond the jurisdiction of local economic conditions, and are thus, independent of them. This makes it difficult to tie hemlines to a single nation’s current (and evolving) financial state. The Index’s focus on women’s fashion is also indicative of gender and cultural bias, which actively ignores male trends (like the shift from everyday formal wear to casual) and non-Western clothing traditions. Similarly in 2020, the COVID-19 recession saw longer, flowy skirts with the return of the “cottagecore” trend, however this may just have been a result of the nostalgia that was being clinging onto, and a push for gender neutral fashion. This could also have been a choice related to the new work from home lifestyle than economic anxiety, thus highlighting the oversimplification. 

Behavioral Economics and the Psychology of Fashion:

The Hemline Index also aligns itself with ‘Behavioral Economics’, a theory that studies how emotions and cultural biases influence financial decisions for society. Developed by Kahneman and Tversky, it explains why people avoid taking risks during times of crisis, even if that’s with their fashion choices, leading to more conservative skirt lengths. The ‘Bandwagon Effect’ also suggests that trends spread as public sentiments about optimism and pessimism grow. During an economic boom, consumers might embrace bolder styles to signal their prosperity and during recessions, it becomes a matter of practicality, so budget-friendly options are donned. These behaviours show how economic psychology intersects with cultural shifts. While the Hemline Index is far from perfect, it’s a modern model trying to incorporate not just traditional data but also social media sentiments, that underscores the value of distinct interdisciplinary approaches in economics. Fashion data could play a similar role to that of say, satellite imagery for banks to predict labour market shifts. AI algorithms can analyse Instagram posts, tweets, and any e-commerce trends that may arise so we are able to detect early signals of consumer confidence shifts. However, for this to work effectively, we require addressing the Index’s flaws like the cultural specificity involved or the gender biases it perpetuates. A more inclusive model could track broader indicators such as the correlation of economic boom to popularity of muted v/s colourful tones, or footwear trends like flats v/s heels. Movements like thrifting, upcycling, and ‘slow fashion’ gained momentum in the 2020’s in an attempt to raise environmental awareness. But, the comeback of post-2020 maxi skirts also has to do with the y2k trend making a comeback, yet another effect of nostalgia.  Unlike the Hemline Index, which is a promoter of quantity of purchases while spending like with miniskirts, these sustainable trends are emphasising quality and ethical consumption. So, recessions now see a spike in secondhand sales of apparel as well. This showcases how economic anxiety is also tied to environmental consciousness in today’s world which further challenges conventional indicators. In order to capture this, economists might track metrics like Patagonias’s “Buy Less, Demand More” campaigns, showcasing how this planetary care combined with fiscal considerations is better able to shape the current fabric of consumer behaviour. 

Conclusion:

While the Hemline Index may have begun as a result of the curiosity from the flapper-era, its power in standing as a credible economic indicator does not have to do with the skirts themselves, but with what they mean to people, and the emotion they draw. Instead of discarding it as frivolous, it can be a way to reconsider the often overlooked nature of economics. These choices– miniskirts or flannel shirts, are reflective of conscious choices, they are not trivial. They stand as records of economic sentiment throughout the years, which require moving past linear models to recognise the role of non-traditional methods, realising that sometimes sentiments play a role that a spreadsheet cannot. 

About the Author:

Niyati Mishra is a first-year law student at Jindal Global Law School and a member of the Economics and Finance cluster at Nickeled and Dimed. She is interested in Mergers and Acquisitions, Private Equity and Corporate Restructuring, and is keen to explore the intersections between law and finance and navigate corporate legal frameworks.

Image Source : https://www.instyle.com/fashion/clothing/what-is-the-hemline-index-real