Haircut Index Economy and Discretionary Spending

  • October 20, 2015
  • Kate Sheehan

Haircut Index2 -

The Haircut Index – how it affects you and the economy

What’s a haircut got to do with the economy?

The theory goes that if you can choose what is essentially a discretionary item and measure the spending on it, over a period of time, you get a feel for what’s happening behind the raw dry numbers that are used to measure economic performance.

Analysts have previously used methods like the iPad and Big Mac indexes to look at purchasing power across the globe.

What better measure then, than the price of haircuts?

Everybody needs one – eventually, even those young men trying to revisit the early seventies.

The question is how much are they prepared to pay?

Well the price varies massively according to where in the world you live.

According to Business Insider Australia, UBS analysts surveyed prices of several services — including haircuts — across the world and found that prices for these “discretionary purchases” are related to local wages. It’s no surprise that cities like Geneva and Zurich have the highest priced haircuts in the world.

Where the haircut index comes in handy, is that it actually can give you a fair measure of when spending starts to pick up. When things are tight it is relatively easy to put off a haircut for a week or two, but when things are going well you don’t even have to think about it – just go and get it done.

One universal truth is that women spend substantially more on haircuts than men. On average, women spend 40% more than men on haircuts for essentially what is the same service. It goes to show that price is more about perceived value rather than actual value.

Which leads us to maybe considering a beauty salon index.

John Paul Dejoria, founder of hair care company Paul Mitchell, claims that beauty salons are the best economic indicator. He says that customers regularly visit beauty salons every six weeks; but in harder times the visits are more like every eight weeks.

Who would have thought – hair styling … a leading indicator of economic recovery?

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