Several years ago I moved into a new office at my place of employment. When I looked in the desk, I found 162 pennies in one of the drawers. I can only assume that the previous owner used the desk as his chosen repository for all the pennies he received in change whenever he went out for lunch.
I can’t really blame the guy who did that. In fact, I think pennies are an anachronism and need to be removed from circulation. Yes; the US Mint announced it is going to stop penny production in 2023 — but they will still be legal tender, and therefore handed out as change.
With that in mind, here are several reasons why the penny needs to be entirely removed from circulation:
1. Inflation has made the penny irrelevant.
In 1857, the United States Congress stopped production of the half-cent piece. In 1857, one-half cent had the purchasing power of 14 cents today. In essence, when the half-cent was finally discontinued the penny had more than 28 times the purchasing power it does today. If the Congress of 1857 was still in power today, not only would the penny be discontinued, but so would the nickel.
2. Pennies are expensive to produce.
By the end of 2020, it cost the US about 1.8 cents to make a penny. That means that the US Mint is increasing the national debt with every penny they produce.
3. You can’t use them in vending machines.
Well, at least I’ve never seen a vending machine that accepts them.
4. They slow down transactions at retail establishments.
While not as bad as the time I got stuck in line behind a lady who paid for her groceries with only quarters, I hate it whenever I have to wait for folks who dig into their lint-filled pockets for pennies in order to avoid receiving any more of the dreaded coins in their change.
I know what you’re thinking: But, Len, won’t elimination of the penny result in increased consumer costs?
Uh oh. I see you’ve fallen for the fairy tales being spouted by Americans for Common Cents, a pro-penny group that is backed by the zinc industry (pennies are almost 98% zinc). Let’s look at their two primary arguments in favor of keeping the penny:
1. Rounding prices up to the nearest nickel would result in higher prices.
Past evidence shows that this claim is utterly baseless, for if this were true one would expect inflation to have occurred in the years immediately following the abolition of the half-cent in 1857. However, in fact the opposite effect occurred; the United States actually enjoyed a sustained period of deflation the following year.
To wit, here are the rates of inflation between 1858 and 1861:
1858: -7.1% (deflation)
1859: 3.8%
1860: 0.0%
1861: 0.0%
2. Many charities are totally dependent on pennies for their donations.
This claim is so absolutely preposterous that it should be dismissed out of hand, but I’ll address it anyway. Such an argument presupposes that Americans — the most charitable people on earth — would suddenly refuse to put money in the Salvation Army kettle, or stop donating to charities simply because the smallest coin in their pocket would be a nickel instead of a penny.
It actually makes more sense that charities would see an increase in their contributions because, although a nickel is worth five times as much as a penny, it does have one big thing in common with its copper cousin: absent additional cash, you simply can’t buy anything with it.
The United States Congress is responsible for regulating the national currency. What do you think? Should Congress abolish the penny? If you’ve got a moment to spare, please share your thoughts on this, because I’d love to hear it.
In the mean time, I’m going to the grocery store to find something I can buy for $1.62 — all in pennies, of course.
Hopefully you won’t be the lucky person that gets stuck behind me at the checkout counter.
Photo Credit: JD Hancock
I tried giving up pennies in grad school (like for Lent).
Now I just don’t believe in them anymore. That seems to work better.
I don’t mind pennies at all. They kind of work like a forced savings account for me. Every year I take the pennies in my penny jar that I got in change, take it to Coin Star and end up with between $50 and $100 in my pocket.
Another great article, Len! You’re quickly becoming my new favorite PF blogger.
For what it’s worth, I say the penny should have been ditched long ago. But nobody ever listens to me.
Thanks Len! I am doing a debate for school and this website has been both informing and interesting. I think that we should get rid of pennies, because most people don’t like carrying them around and when they bring them home they don’t get back into circulation. I also agree that pennies are a waste of time, back when I used to work in a grocery store I hated counting pennies in transactions and when I closed my register. Thanks!
I know this is an old one but something to add. When my ex and I were stationed overseas all prices were rounded up or down to the nearest nickle because pennies were just too expensive to fly over. I loved it, everything so neat and tidy. It was a real shock to come back stateside and deal with pennies again.
Wow, that’s really interesting! So the practice of rounding to the nearest nickel HAS been put to use — and the sky didn’t fall down either. That is great to hear! Thanks for sharing that, Mikele.
I was stationed in Mildenhall England in 1980 and they rounded up or down on the US air base so this has been going on at least 40 years.
I like pennies, but then again I like all coins. Unfortunately, I hoard my coins rather than putting them back into circulation. I don’t know why, but it is just something I do.
I remember back when I was young where you could drop a penny into the gumball machine, or two pennies into the candy machine and walk away with a nice little treat. Today, if the machine takes a quarter for the same gumball or candy, you are lucky. My how things have changed.
As far as charities go, you might find this one interesting. A few months back, my nieces were having a fundraiser at schools using coins. Pennies were used as positive points while the other coins were used as negative points. Each class were competing against each other by trying to collect as many pennies as possible while sabotaging the other classes by dropping other coins into their collection bins. Knowing that I collect/sort all my coins, my nieces came over and asked if I could have all my pennies. I gave them almost $50 (placed into two containers so they could carry the weight) and they went home with big grins on their faces. So, the pennies still have some practical use. 😀
In the world we now live in where people use their credit and debit cards more than change, I don’t think we would see a big change in the cost of goods if the Mint stopped producing pennies. That doesn’t mean we take the pennies out of circulation, since I think there might be enough out there currently to meet the demands of the economy. On the other hand, companies could price their products accordingly so that the costs (including taxes) of the goods are divisibly by a nickel.
I think many of us have those “I remember when” stories that make us feel old. I use to walk down the street to buy a big piece of licorice for two pennies, and be content all day long. Of course, growing up next to a railroad track, there was always the temptation to lay the penny on the rails to see if the train would flatten it. 😀
I think we should get rid of currency altogether.
The inherent privacy that comes with using paper bills is invaluable, Matt. Besides, currency is not the real problem. It’s the government’s inability to control its spending. Yes?
I think the main reason we still have the penny in circulation (and the nickel, for that matter – it’s currently in the same fiscally-irresponsible boat) is that the federal and state gov’t is unwilling to tax us at 10% for fear there would be riots in the street. Pennies make them able to slip a 7.5% sales tax on people and we just shrug and take it. One day I hope we all wake up. I’d happily pay a Fair Tax of 10%!
If I was manufacturing something that cost me nearly two times what I could sell it for, I would shut that production line down so fast it would cause whiplash. But then, when has logic ever stopped the government from having a good time.
It is way past bedtime for the penny. (Just my two cents worth.)
Australia took their 1 and 2 cent coins out of circulation in 1992. Both coins were 97% copper, an expensive metal. You can get good cash for copper at metal recyclers. I’m not sure what zinc is worth but perhaps those hoarding their pennies in the US could take them to a metal recycler and get more than what they’re worth there. Just a thought. 😀
I keep pennies just in case I get pulled over and I’ve been drinking. 😉
Pennies are very important in economy. We just have to deal with it. I myself just do what the guy did. I just save it until the time I find it with “value”.
I understand the metal in pre 1984 pennies are worth double their face value. Once they go out of circulation you might be able to get their value as scrap metal in other currency. If our money is worth anything by then. Being a packrat sentimentalist, I like pennies. Being a tightwad, I agree with your assessment, there’s no sense in making something that costs more to produce than what it’s worth. I do not doubt postage and sales tax will increase to something divisible by a nickel once the penny is removed from circulation.
… And it’s not just the penny that costs more to produce than it’s actually worth, Olivia. The nickel is a money-loser for the US Treasury too. Last year it cost almost 8 cents to make one!
I hoard pennies, especially the pre-1981 ones or their copper content. think the metal is worth more than the actual one cent value. Heck, even the newer pennies and nickels- the metal is worth more than the currency value.
My grandparents and my parents always saved change in coffee cans and gave it to us and it really added up! Plus- the coins could make for good bartering during the Armageddon!
I’d love to see the dollar coin gain way more acceptance or 50-cent become popular again and THEN get rid of the penny, so the penny slot in change tills actually would still have a use for nickles, or maybe we can find a way to make them out of a very cheap base metal or something (didn’t they have paper pennies, nickels, quarters, half dollars and ~half pennies~ back during the Civil War, I remember hearing about that in history class)
I’m wondering how this would work in investment accounts, i.e. would dividends only be given in increments of $0.05? same with interest? or would it only be for transactions.
Also, would cashiers have to calculate the round up? I could see issues.
I’m not super opposed to dropping it, but my math brain resists.
I can see working this so the smallest increment would be $0.05 for retail transactions; after all, when the value of a penny is essentially so minuscule that it can’t buy anything there is no point in potentially receiving a penny in your change. Heck, one might even argue that this would hold true all the way up to a quarter dollar.
However, for trading stock, I see no reason to eliminate trading down to the nearest penny. Especially for those who invest in “penny” stocks!
If we eliminate the penny, we should follow the lead of Canada. They did not demonetize their penny, they just stopped producing them. Eventually they will be gone by attrition.
The people perpetuating the lives of pennies are the retailers who price their goods at some level of 99 cents to deceive us into thinking the product costs less than it does, e.g. $3.99 instead of $4.00.
If they get rid of the penny, I won’t have something to hand a person and say, “This is how much I value your opinion.”.
When I was a little kid, I always prefered shiny pennies to any other coin. Still a little kid at heart. My uncle gave me his childhood penny collection. Added it to my own books. Still collecting. As it is, now that the penny will be discontinued, that will end next year. Ah well. Gotta grow up sometime.