Those of you living in the U.S.: raise your hand if you have hundreds and hundreds of pennies in jars at home? I thought so. Me too. They are a nuisance. It's time to remove them from circulation. When I did a little research on this, though, I found that not a lot of people agree with me, including the government. But, as I also found, they may be biased.
I started thinking about this last summer when I was living in London, where I really enjoyed carrying around change that could actually buy me something. A two-Pound coin is worth roughly $3 US. You have no idea how thrilling it is as an American to walk into a pub and purchase a pint of beer with change. Until the recent run of the new "golden dollar" coin (still not in wide circulation), the largest-denomination coin an American is likely to be carrying around is a quarter.
That led me to think about inflation and buying power. You don't have to go back that far to find a time that a penny had the buying power that a nickel, even a dime, has now. If there was no great need for tenth-of-a-penny coins then, we shouldn't need pennies now. That and the nuisance factor is where the debate starts and stops with me; I'm tired of carrying around worthless objects, and when I refuse to do so out of principle, more of them accumulate as I buy things. Grrrr.
The public debate is more complex. Surveys show that the public is, for the most part, rather strongly opposed to eliminating pennies. A 1991 Gallup poll found that 91% of the public agreed the penny was a "long-standing tradition in this country", and 61% opposed decirculation. The most frequent reason for opposition (77% of those polled) was the fear that the elimination would force retail prices up from rounding. This isn't true, of course: consumer and merchant have equal chances during rounding.
There are consumer and trade groups that support elimination, though: the Coin Coalition, (www.coincoalition.org), an industry trade group, lists several reasons:
The above may seem like, well, penny pinching on the part of the retailers, but that sort of thing adds up.
Of course, there are also industry groups that strongly support the penny: one prominent one is "Americans for Common Cents", which is (surprise!) a zinc industry trade group (pennies are 97% zinc, with a copper coat. Pre-1982, it was the reverse and they were mostly copper). On their website (www.pennies.org) they list several bullet points in support of the penny. Among these are:
- Pennies facilitate commerce: The U.S. Mint produces roughly 13 billion pennies annually
- Elimination of the penny would increase prices
- Charitable causes, which accept pennies as donations, would suffer
- The penny "is part of our nation's history and culture"
- The U.S. Treasury makes a profit from the penny
Yes, you read that last one right. In fact, the U.S. Mint is asked often enough about penny decirculation that it is an item on the FAQ at their website:
We occasionally hear from people who believe that the Mint should stop producing one-cent coins and remove them from circulation. You may be interested to know that the penny is the most widely used denomination currently in circulation. There was a study conducted in 1976 of this and other suggestions regarding our coinage system. However, the idea of eliminating the penny received strong objections from an overwhelming majority of State revenue collection departments, retail firms, and commercial banks. Other objections voiced in later studies concerned the inflationary impact of such a proposal on prices and possible difficulties on collecting sales taxes.
It has not been confirmed that the penny has outlived its usefulness. Neither business nor the public as a whole has pressured for changes in the coin denominations in circulation today. In addition, our coin and currency system is among the most trusted in the world. The vast majority of users apparently are content with the existing coin denominations, including the one-cent coin. As a result, the Treasury Department has no plans now to cease production of the penny. In addition, such a change to the United States monetary system could not be done without prior Congressional authorization. If directed to do so by legislation enacted by the Congress and signed by the President, the Treasury Department would again study phasing out the penny. Since the demand exists and the Federal Reserve Banks require inventories to meet the demand, the United States Mint is committed to producing the penny.
Keep in mind when you read the above that any coinage taken permanently out of circulation is essentially equivalent to giving the government money. Now have another look at those penny jars you're never going to make a dent in.
Is anybody with me? A penny for your thoughts...
- U.S. Mint website, www.usmint.gov
- "Penny Saved, Penny Yearned?", Ellen Sung, Policy.com
- "Future of the Penny: Options for Congressional Consideration" (General Accounting Office Testimony, 07/16/96, GAO/T-GGD-96-153)
- Americans for Common Cents, "Ten Reasons to Keep the Penny", www.penny.org
- The Coin Coalition, www.coincoalition.org
My two cents on the writeups below (such copious opportunities for puns!):
mblase: I agree that the cash register reprogramming issue is a hassle, but more and more registers are just computers these days, making it easier to fix. Other countries have done this, as dr points out. Besides, they don't have to be reprogrammed right away; until you reprogram the register you just round up or down from the price displayed. This is what happens anyway when sales tax is applied: $23.47 with 7% sales tax comes to $25.1129, but with the current 1-cent rounding you pay less: $25.11. Without pennies you would pay $25.10, an even larger savings. You would make money in that case. Rounding to any system -- 1, 5, 10 cents, whatever -- is mathematically fair in the long run, as SlightlyMadman and dr point out below. Besides, if there is a short-term artificial effect, it will be that things stores like to advertise as $N.99 will become $N.95, a 4 cent savings.
Remember that I'm saying that I'd like it to happen, not that I expect it to anytime soon. People don't like change (reverse-pun intended). Lots of people are sheep and wouldn't understand rounding, and would complain that they were being ripped off when 5.08 was rounded up but not blink when 6.22 was rounded down. Hell, the U.S. is the country that tried to convert to the metric system and failed. It probably won't go away until paper money goes away, which will be another big fight.
But I can't wait.