Ah, the penny. Literally the least valuable piece of currency in all the land. For about two years now, I’ve been working on a grassroots campaign to rid our country of this penny infestation. Why, you might ask? A perfectly fair question.
JT’s reasons for the banishment of pennies:
1) They’re worthless. When penny was first minted in 1787, the average American’s yearly income was $250. The penny was a valuable coin.
And even into the 1950s there was penny candy, penny shows at the movie theatre, penny stocks, and so on and so forth. But with inflation, the dollar’s buying power has dwindled and the penny’s has disappeared.
2) They’re ubiquitous. Most pennies don’t end up in circulation.
They end up in ashtrays, coin jars, couch cushions, down sewer drains, on train tracks, the trash, and in those “Take a Penny, Leave a Penny” cups. There are an estimated 183 billion pennies in existence today, and an estimated 60% of them aren’t in circulation. That’s 230,000 metric tons of pennies that will most likely never be spent. We don’t need any more.
3) They’re bad for the environment. Pennies nowadays are made up of 97.5% Zinc, which is hazardous to mine and gives off deadly fumes to refine. Copper makes up only 2.5% of the composition.
4) They’re not that useful. You can’t use them for bus fare, or in vending machines (except in Illinois — remember a guy named Lincoln from there?), or in gumball machines. You can only use them in cash transactions. Contrary to popular belief, you can’t even use them to throw off a breathalyzer test(1).
The main argument against discontinuing the penny is that making the nickel the lowest denomination will cause inflation to increase, and merchants will round up prices, meaning the consumer pays more. Raymond Lombra, Ph.D., Professor of Economics at Penn State University, told the Senate Banking committee in 1990 that rounding cash sales up to the nearest nickel would cost consumers over $600 million annually(2). Um, that’s two dollars per person, per year. I’m fine with that. To save everyone two bucks a year isn’t sufficient reason to continue to mint 7,700,050,500 pennies every year. Pennies, by the way, make up more than half of the coins minted each year. And inflation’s increasing as it is, and I haven’t seen any data to make me think the lack of pennies will speed up the process.
The other reason the government doesn’t want to discontinue minting pennies is that they only cost 0.81 cents to make. So the government makes about one-fifth of a cent on each penny minted, but with the number produced each year it adds up to a pretty penny (forgive me for that pun). The GAO did a study, published in 1996, that said the government actually lost about 9 million dollars on pennies when you factor in the cost of distributing them to commercial banks(3).
Sure, it would be difficult to remove them from circulation. The government would have to institute a massive (and expensive) recall operation. They’d then have to melt them down and find something to do with all that Zinc (a monument to pennies?). There’s also the fact that the rounding would only take place on cash transactions, making it a regressive tax that would primarily affect the lower class, as they are the demographic that pays cash for most everything. Retailers would quickly mark everything up a cent or two to insure the rounding always goes in their favor, which I covered, briefly, above. But after a year or two of that, no more pennies. We save about 6 billion a year in production costs. Not to mention the time savings for every merchant that currently accepts pennies. It’s estimated that, without having to count pennies, every cash transaction would finish two seconds sooner. This doesn’t take into account the time it takes each night to count out every register with pennies in it.
Time, as they say, is money. And at this point in our history the penny just doesn’t make sense.
As porter mentioned, a recent article by the AZ Central newspaper indicates that, due to the rising costs of Zinc, it now costs 1.4¢ per coin to mint the penny.
Also, in the May 1st Ask Yahoo, they discuss whether or not the penny will ever be taken out of circulation. Of course, being Yahoo they get the facts about half right.