Shah: Penny For Your Thoughts
Take the penny out of circulation.
You’re walking to class and you see a penny on the sidewalk. Do you take a moment to pick it up or do you walk past it? According to an analysis by the New Yorker, if you spent more than 6.15 seconds to pick the penny up, you could have better used your time.
The penny first became legal tender in 1856 and was the first coin to commemorate a public figure — Abraham Lincoln — in 1909. Yet while pennies are a cornerstone of American life, recent evidence shows that phasing the penny out of circulation would result in economic and environmental gains, outweighing the penny’s current value.
Small denominations are going out of circulation, largely because of the growing difference between small coins’ face value and production costs. In 2016, it cost the U.S. Mint 1.5 cents to produce a penny, resulting in a loss of approximately 50 million dollars a year. This is because the price of zinc has tripled over the past 14 years. Even the nickel costs 6.3 cents to make. By comparison, the dime costs 3 cents to make and the quarter costs 8 cents.
In 2013, Canada took the penny out of circulation, primarily because inflation significantly reduced the purchasing power of the penny. The country will save 11 million dollars per year by getting rid of them. Australia removed the penny from circulation in 1992 due to the rising cost of copper required to mint the coins and the loss of purchasing power a penny had due to inflation. Italy has done the same this year. The politicians who proposed the measure argued that the utility of the penny had fallen — the coins were no longer accepted by parking meters or vending machines and were often left or abandoned.
Minting pennies also has significant environmental consequences. While mint facilities have been working to reduce their power consumption and direct emissions, the cost of getting copper and zinc out of the ground is high. In 2007, for every ton of copper produced, 2.45 tons of carbon dioxide were emitted. Additionally, when zinc is leached and purified, it releases sulfur dioxide, a chemical associated with respiratory illnesses.
In addition to environmental and financial costs, taking pennies out of circulation would reduce the time consumers and retailers spend at the point of purchase. The use of pennies adds approximately two seconds to each transaction. If one assumes that the average American makes one cash transaction with pennies per day, they’ll waste 730 seconds per year. According to a Washington Post analysis from 2006, penny usage wastes around $1 billion in economic resources each year.
The U.S. has taken coins out of circulation before. In 1857, the half-cent coin was removed since the cost of making it exceeded its value. In 1965, 90 percent-silver dimes, quarters and dollars were converted to “base metal clad versions.” These changes did not result in catastrophic consequences. Furthermore, the U.S. Army and Air Force banned pennies in 1980 in overseas military exchanges, as pennies were too heavy to transport.
The late Senator John McCain and Senator Mike Enzi reintroduced the COINS Act in 2017, suspending the minting of the penny alongside other currency modernization efforts. When a similar bill was proposed in 1989, an interest group, Americans for Common Cents, funded largely by Jarden Zinc Products, lobbied actively against it. Their argument was supported by an economist who argued that the legislation would act as a regressive rounding tax. In Canada, if an item costs $1.01, the retailer charges $1. But if the item costs $1.03 or $1.04, buyers are charged $1.05. However, recent studies have found evidence against this argument, showing that the effect of the “rounding tax” is negligible.
One argument against the elimination of pennies is that pennies are essential to various charities’ fundraising efforts. Many charities, such as UNICEF, ask people to donate pennies and use coin canisters to collect donations. However, there has been a recent shift toward electronic payments that may eliminate the need for pennies for these charities.
Society is becoming less dependent on cash and more on mobile and electronic payments. The penny’s lack of economic utility and the production process’ harm to the environment provide ample reason for removing the penny from circulation. As former U.S. Mint director, Philip Diehl, said, the penny is “beyond hope.”