The U.S. One Cent coin, or penny, has almost no purchasing power today. The cost of making pennies in 2019 was 1.99 cents per coin. This cost includes the metal content and the labor used to produce them. The cost of producing them is higher than face value. The melt value of pennies ranges from more than two cents for the pre-1982 copper pennies, to nearly a full cent for the copper-plated zinc pennies. However, the penny is a very sentimental coin to most Americans, and many people fear that eliminating the penny would raise prices because things would need to be rounded up to the nearest nickel.
However, the nickel is in just as bad a shape as the penny. The current cost for manufacturing a nickel is 7.29 cents per coin. The mint produces billions of these coins every year. At this rate, the United States loses millions of dollars producing pennies and nickels.
Both sides in the penny debate make some good points, and the solution is far from being an easy decision. Let's take a look at the issues involved in the pro-penny and the anti-penny debate so that you can make up your mind about where you stand on this critical matter.
The United States has eliminated small denomination coins in the past with relatively little trouble. In 1857, the U.S. Mint stopped making the half-cent coin, partly because the cost of making it had exceeded its face value, and somewhat because it was considered to be too small a denomination and it was no longer needed. It too had very little purchasing power at the end of its life.
In 1857, the half-cent had the purchasing power that would translate to well over ten cents today, so in some ways, it was akin to our eliminating the dime. Commerce continued without any major hiccups, even though the one-cent copper coin suddenly shrunk from a hefty, over an inch in diameter piece of copper that weighed almost 11 grams, to a penny that was less than half the weight and 40% smaller.
Additionally, the United States Mint changed the silver composition and weight of many coins due to the increasing price of silver. For example, the mint made the first dime in 1796 that weighed 2.7 g and had 89.24% silver. Less than forty years later, the mint reduced the weight to 2.67 g and used a composition of 90% silver. In 1856, the weight was further reduced to 2.49 g. In 1873, the weight was increased to 2.50 g where it remained until silver was eliminated from all coins in 1965
Another significant change in U.S. coinage occurred without any catastrophic effects on commerce. In 1965 the U.S. Mint stopped making 90% silver dimes, quarters, and half-dollars and changed them over to base metal clad versions. The composition of the coins consisted of an outer shell made out of 75% copper and 25% nickel bonded to a core of pure copper. A few people groused about it, but commerce continued unabated.
There have been several other minor changes in the coin metal composition. These composition changes ranged from temporary wartime alterations during World War II, to more permanent switches like using zinc instead of copper for the penny. More recently, the mint changed the cupro-nickel clad dollar coin (the Susan B. Anthony) to the "golden dollar" type used in the Sacagawea and Presidential Dollar types. None of these changes caused any significant problems in commerce.
Many foreign nations have eliminated their most minor denominations with almost no impact on commerce or consumer confidence in the monetary system. New Zealand got rid of its penny and two-penny coins without incident back in 1989, and in 1991 replaced their two lowest paper denominations with coins. In 2006, New Zealand eliminated the nickel, and while they were at it, they significantly shrunk down the rest of the coins. All of this numismatic change took place without any significant problems.
The Canadian government stopped producing pennies in May 2012, and the Royal Canadian Mint ceased the distribution of them as of February 4, 2013. Unlike some other foreign governments, the penny remains legal tender in Canada. However, it is removed from circulation when tendered at a Canadian banking facility.
History has shown us that updating the monetary supply in countries where the currency is very stable has had little if any adverse effect on the economy, or people's acceptance of the coinage.
Those who think we should keep the U.S. penny cite the following arguments to support their position.
- Prices will increase. If the U.S eliminates the penny, merchants will round the amount up to the nearest five cents. They will probably round everything up in their favor, costing us more for everything we buy.
- The poor pay the most. A corollary to the above argument says that the poor will be affected the most because the poor are most likely to make more frequent, smaller purchases, thus suffering the rounding up more often.
- Charities need pennies. Many small charities depend on penny drives to bring in donations. People think nothing of pouring out their old penny jars to support these drives, but they won't part with nickels so easily.
- Nickels cost even more to make. If we eliminate the penny, we will need more nickel coins in circulation. Nickels cost 7.29 cents to make, (2.29 cents over face value, as opposed to 0.99 cents over face value to make a penny,) so making each nickel costs 1.3 cents more than making each penny. Since the penny costs almost 2.5 more than face value to make, the Mint can make 5 pennies and still lose less money than making one nickel. And, of course, if we eliminate the penny, we'll need a lot more five-cent coins, which will offset the savings of stopping penny manufacture.
- Pennies are sentimental. The fact is that Americans love their pennies and hate to change things. We've always had pennies and therefore still should have pennies, according to this thinking. This type of thinking uses the same logic that rejects eliminating the paper dollar in favor of a much more cost-effective coin. Additionally, the same reasoning rejected the adaptation of the metric system in the United States even though virtually the entire rest of the world uses it. Americans are traditionalists, and the Lincoln Cent is the epitome of modern-day circulating coin tradition.
The folks who want to retire the penny also have some compelling arguments, including those below.
- Pennies are worthless. They don't buy anything, many people throw them away, and nobody wants to use them, so let's get rid of them. Many stores have "Leave a Penny, Take a Penny" cups next to the cash register for customers who don't want pennies and change.
- Pennies waste time. The average American wastes 2.4 hours a year handling pennies or waiting for people to handle them. This statistic, which is cited by the folks at RetireThePenny.org, is the result of compiling some penny-handling related events. These events include the ubiquitous 30 second period we sometimes spend waiting for someone who has to dig through their pockets or purse to find that last cent so they can pay for something with exact change. They probably do this, so they don't get stuck with any more pennies.
- Making pennies wastes taxpayer money. It costs the U.S. Mint 1.99 cents to make each one-cent coins, meaning that taxpayers are losing 0.99 of a cent for each one of the 9.1 billion pennies the Mint produces each year. That is a loss of over $90 million to produce pennies in 2019.
- Making pennies wastes time. The U.S. Mint makes an average of 21 million pennies per day to produce its nine billion pennies annually. If we get rid of the penny, the U.S. Mint would only have to do half the work. This figure does not include the time, fuel, expense, and hassle of carting all of those pennies around to the banks, merchants, etc. If we stop making pennies in the first place, we save all this associated time and trouble, too.
- Rounding-up prices wouldn't matter. The anti-penny folks rebut the rounding-up argument by pointing out that we wouldn't pay more for each item we buy, only for the total price of what we buy. Even if you shop 2 or 3 times a day, (which most people don't) and also if the rounding goes against you two times out of 3 (which it shouldn't), we're still only talking about a 3 or 4 cents per day at the most! Most people throw more than four pennies into the change-jar or trash each day anyway!
- Pennies are less than the minimum wage. A New Yorker article pointed out that pennies are so worthless now that it doesn't even pay the federal minimum wage to stoop to pick one up off the street unless you can do it in 6.15 seconds or less.
Where Do You Stand?
In some respects, we can make the same argument for the paper dollar. Although the cost for printing a dollar bill is about five cents, only lasts an average of eighteen months. A dollar coin can last up to forty years. Maybe this is another consideration that the U.S. government should look at.
As you can see, both sides have some good points. As the U.S. Mint faces the prospect of having to find more cost-effective compositions from which to make the nation's coinage, the debate about the continued existence of the humble penny is sure to carry on.
Many people thought that 2009, the 100th anniversary of the Lincoln cent, should have been the last year of penny manufacture. But others have a vested interest in keeping the penny alive. For example, the zinc metals lobby, and the Coinstar company (who make those change-counting machines in the grocery store) will both fight hard to keep the penny in production.
Edited by: James Bucki