Pink Lips Save Greenbacks

As a non-economist, it is not surprising that I find the most interesting economic indicators to be the ones that sound the least technical. Gross Domestic Product, the Consumer Price Index and New Home Sales are all extremely useful. But it probably does not surprise my fellow non-economists that when I first heard the term "The Lipstick Effect" in class, it was the one that got me thinking.

I’m not a huge cosmetics person myself. I mean, I do wear make-up and am pretty familiar with the semantics, but I’m not what you would call an aficionado per se. But I like wandering and testing in Sephora as much as the next girl and so I understand why people who write about the lipstick effect refer to the purchase of lipstick as a small indulgence.

Supposedly this perception of make-up dates back to the Great Depression when, according to Nancy Upton, a professor of marketing who focuses on consumer sentiments: “What we saw was a consumer trying to make themselves feel better through small, indulgent, hedonic consumption.” This idea gained support with the spike of lipstick sales after 9/11.

Eve Pearl discusses the concept in her commentary on the Huffington Post entitled The Lipstick Effect of 2009. According to Pearl, lipstick isn’t enough to get women through the current crisis. It will take more than a new shade of the pink to get you making the green – maybe a wardrobe upgrade or a change in skin regimen? Whatever it takes to make you stand out in the applicant pool, she asserts.

While I can’t imagine that lipstick purchased will repair all of the negative sentiments associate with the current recession, there is something to be said for simple pleasures that satisfy the crave to shop and make you feel prettier at the same time. And who knows? Maybe it’s times like these when even the smallest items feel like a real treat that keeps us remember how fortunate we are when everything is great.

On that note… Ruby Red? Sweet Peach? Light Plum? Which do you think looks best?

~ Elizabeth Micci

Sam's Story x 11 million

Today is the “March for America” immigration reform rally in Washington D.C. and it got me thinking (as a non-economist) about the economic effect of immigration on our country.

I was listening to Marketplace on Friday and heard this story of Sam, an undocumented immigrant who was brought to Indiana from Mexico when he was 4. Now he's in college--a jazz prodigy--but has come to realize that upon graduation, he won't be able to work.

Sam wants to stay in America--as he says, he grew up with Barney and Power Rangers just like we did. He's not a citizen and has had to hide that part of his life for years.

Sam might be forced to get a job that pays under the table because employers won't (or shouldn't) hire illegal immigrants.

The Congressional Budget Office found that 50 to 75 percent of undocumented immigrants pay federal, state and local taxes. And they contribute about $7 billion per year to Social Security.

Desperate to find work, countless undocumented workers in this country are paid less than the minimum wage—effectively putting millions of people into poverty so that we can reap the benefit of cheap labor.

Multiply that by millions of Sams, and that’s a big impact on the economy.

The cost of cheap labor is greater than the price—and when the market fails to right this inequality, government intervention must occur.

Chances are Sam won't live up to the earning potential that his college degree got him. Isn’t that why we all go to college in the first place? To help us become who we want to be--part of that, undoubtedly being making enough money to live our dreams and support our families?

It’s a heated debate, and I don’t want to get political. But there’s got to be a point where economics and humanity meet. And that’s where the right choice will be.

--Stephanie Hardiman

Fashionomics

I don’t know any girl that doesn’t shop at Forever 21. And why wouldn’t they? It has key trendy pieces for every season for (basically) dirt-cheap prices. But I have been hearing reports over the past year about “fashion copycatting,” or taking runway looks and turning them into cheaper, more consumer-friendly products.

Freakonomics posted a blog entry about this phenomenon, saying that it is actually good for the economy and the fashion industry as a whole. It gets average consumers excited about fashion, seeing as they can now afford the looks they saw on the runways of Proenza Schouler or Alexander Wang. Stores like Zara and H&M take these looks and use cheaper labor and fabrics to turn them into clothing that won’t break the bank.

For me, I think fashion copycatting is the perfect way for consumers to be exposed to fashion. After all, if people are spending, the economy is improving. But I don’t think I like what it does to the industry itself. Fashion has always been about innovation. Anyone who has ever seen Project Runway knows that. So the question I’m asking is, where is the innovation in a chain strap quilted bag that is eerily reminiscent of the now infamous Chanel version? Where is the creativity in the iconic Birkin bag hanging in Zara under a completely different label? What is this copycatting doing to these fashion houses?

Also, when it comes to bags, something else has come to my attention. It is the selling of fake designer bags and clothing. Louis Vuitton won a lawsuit against eBay this year for "harm[ing] the image of luxury-brand Louis Vuitton after the online auctioneer paid to have Internet searches directed to its site that included misspellings sometimes used to sell counterfeit goods." People are making money off of the ideas of others everywhere. On the web, at the mall, on streetcorners.

While the writers of the Freakonomics blog favor “fashion copycatting” for the good of the economy, I, as a non-economist, just can’t, at least for designers themselves. For me, fashion should always be about innovation and finding inspiration in others, but not blatantly copying. Fashion history does repeat itself, but it shouldn’t be seen on the runways of New York Fashion Week one day and be on the shelves of Forever 21 the next.

-Claire McCandless

Move Yo Money!

If you're a Lexington-ite, you'll notice that on Financial Corner (what I've now dubbed the intersection of Nelson and Main Streets because of the location of both Wachovia and Suntrust Banks), CornerStone Bank broke ground last week.

It's been in a trailer (yes, a trailer) by Donny T's for the last year or so, but it looks like they're finally getting a brick and mortar structure.

Amidst the economic downturn and a year when many banks ended up closing shop (R.I.P. WaMu), CornerStone was one of the few banks nationally that opened its doors last year.

But what's more interesting to me, as a non-economist, is this movement from national to local banks.

Arianna Huffington, creator of the Huffington Post, in particular has been pushing the movement (dubbed "Move Your Money"). Basically she thinks it's crazy for Americans to keep supporting banks that not only got us into this bad situation, but then rewarded the wrongdoing company leaders with exorbitant salaries paid out of the national coffer. Local banks are looking out for the local economy and local people--not some big-shot in a corner office hundreds of miles away.

And Linda Hooks, Washington and Lee University professor of economics, told Rockbridge Reporter Alex Scaggs last year that local banks probably have a better handle on what's going on with their customers than national banks do--no surprise there.

"Economic theory says that banks work by gathering information and monitoring what’s going on with, say, a business they've lent money,” said Hooks. “The best way they can gather information and do that monitoring is by being right there on the scene. So a local bank probably knows more about a local business."

This was confirmed by Bank of Botetourt Senior Vice President Duaine Fitzgerald, who alluded that his bank is probably more likely to work with customers in a tough situation than a large corporate entity would be. For the record, Fitzgerald's bank wasn't involved in the risky lending that got many banks in trouble, and the bank therefore didn't have to take any TARP money.

Maybe, just maybe, by moving our money to local banks we can keep the focus on people, service and honesty. But maybe it'll just mean paying more ATM fees too.

--Stephanie Hardiman