Blogs | November 3, 2011

Why are women’s haircuts more expensive?

Maarten asks: Why do women get charged higher prices at the hairdresser than men?

Ian answers:
When it comes to haircuts and money, I usually think of the technical definition of a haircut that is used in financial markets. But that is not the haircut you’re talking about. It is probably a fair observation that women pay more when they visit hairdressers than men when they sit in the barber’s chair for a similarly complex cut – but I can’t cite data to prove it.

Keeping up appearances
That is one of the difficulties in answering this question. We cannot be sure when comparing men’s and women’s hair care that we are comparing like with like. The knee jerk response is to say that women’s haircuts are more complex than men’s. Longer hair, more styling and a time consuming blow dry.
But that answer leaves me unsettled. It might partly explain the difference but it avoids the question of why women seem to agree to more complex hair care than men. When we ask this, we delve into the realms of fashion, marketing, peer pressure and – hold onto your wigs – positional goods.
Taking inspiration from an ageless country and western tune, “sometimes, it’s hard to be a woman”. In many countries, it is argued that popular culture encourages women to dress and have hair in the latest style. And the latest style will change over time. Keeping up with fashion costs money. Keeping up with fashion is similar to the wider idea of “keeping up with the Joneses”. In this case, it can be argued that peer pressure – or peer effects in behavioural economics terms – plays a role in the difference in cost.
But take a step back and consider why people are affected by peer pressure. Perhaps we want to “keep up” with our peers – or maybe signal our greater success. It might not even be conscious. People can do this in many ways – more expensive cars, bigger houses, grander holidays or perhaps a fine mane. By sending such signals, they might be held in high regard and perhaps be given more business or be favoured in other ways. Their apparent success may breed actual success.

Survival of the fittest?
It’s almost Darwinian. That is what author and academic Robert Frank believes - so much that the title of his most recent book is The Darwin Economy.
Amongst other things, Frank argues that people often get caught in a race to show that they have succeeded and need to display their success in various ways. This show of success will then increase one’s position (hence the term positional goods) in society relative to others. High end fashion – and by extension (get it!) hair style – signals success. However, if someone in your circle already has the latest “it” item, there is pressure to buy an even better version to improve position. The theory goes that unwittingly a spending “arms race” is unleashed. Frank argues society as a whole would be richer if there could be agreement amongst everybody (just as with negotiations in a military arms race between countries) to cut the amount they spend on positional goods.
In this particular case, we may think of this as a haircut on haircuts.
The money not spent could then be saved. The increase in economy-wide savings would allow higher investment and stronger growth for all. In the parlance of economists, you have a collective action problem. Frank proposes a tax on excessive consumption designed to produce this affect.
Frank recognises that part of the trouble in getting people to accept this is that, for all the benefits increased saving may bring, savings “cannot be observed easily, and for that reason would be predicted to be nonpositional.”
Put it another way – saving isn’t perceived to be fun.

Trimming our spending
The trick then is to make saving fun. For individuals, one way to do this may be to imagine how they want to live in the future. Sacrificing some position now in order to have a higher position later – perhaps by being able to retire earlier than your work colleagues or be mortgage free before your peers – may be worthwhile. Individuals have to combat hyperbolic discounting (or our desire to be rewarded now rather than in the future).
Frank recognises this arguing that “saving less today means having less to spend on positional consumption in the future. But the general human tendency to discount future costs and benefits too heavily cuts the other way. Saving less today means having less for positional consumption tomorrow...”
Well kept hair can be an asset. There is nothing necessarily wrong with it. However, when the cost becomes so great it reduces current and future opportunities, it may be time to cut back and accept a more conservative style.

The long and the short
Maarten, when you asked this question, you probably did not expect a blast of hot air about peer effects and behaviour. But how we choose to spend our money tells us much about ourselves and our priorities. The long and short of it is that the anomaly between the price of men's and women's haircuts is much more than a fashion statement.

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Ian Bright
Ian Bright

Senior economist at ING
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45 blogs

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