Thursday, May 23, 2013
It costs the Canadian government more than a penny to mint a Canadian penny. So, to save money, the coin is being phased out of production, according to an Associated Press story this week.
The story reports that New Zealand, Australia, the Netherlands, Norway, Finland and Sweden are just a few of the other nations that have abandoned pennies for similar reasons.
Pennies are also too expensive to make in the United States. It cost the U.S. Mint "2.4 cents to make one penny in 2011 and about 11.2 cents for each nickel," according to this 2012 story from CNN.
So why can't we do as the Canadians do, and get rid of pennies?
Some people may object to shops rounding their prices to the nearest 5 cents. But retailers are just as likely to round down as they are to round up, and more and more transactions are happening electronically, without cash or coins at all.
It's also important to bear in mind that, because of inflation, a nickel in 2013 is worth roughly as much as a penny was worth in 1970. If people got by without a 1/5th-cent back then, surely we ought to be able to get by without a penny today, right?
Some economists have pointed out that pennies cost us money in other, more subtle ways. For instance, the National Association of Convenience Stores and the Walgreens drugstore chain estimate that fumbling pennies adds 2 to 2.5 seconds per cash transaction.
That time gets wasted for two people — the customer and the cashier — but if you add it up just from the retailers' point of view, they're paying millions of cashiers to spend hours of their time on the clock every year just to diddle with pennies.
If you start to think of the cost of pennies in terms of wasted time, it might not even be worthwhile to stop and pick one up off the ground. As Randall Munroe, author of the xkcd webcomic, explains:
"If your time is worth $10 an hour, a penny is worth 3.6 seconds. If spotting and picking up a penny takes you more than 3.6 seconds, it’s a loss."
Although, he continues, it might be more worthwhile if you factor in the value of the healthy physical activity involved in bending over and picking up nearly worthless things from the sidewalk.
Arizona Republican congressman Jim Kolbe agrees with all of this. He introduced two bills, in 2002 and in 2006, to get rid of pennies here in the U.S.
And yet, we still have unwanted piles of them next to virtually every cash register.
Our pennies are mostly made from zinc, and "the U.S. zinc lobby has been a major opponent to suggestions that the penny be eliminated," reports the AP.
At the end of the day, most of us would benefit a little bit from getting rid of pennies, but they're still only worth one measly cent, and they're merely one minor annoyance among dozens we encounter on a daily basis.
For the zinc industry, though, pennies are big business — it's literally hundreds of millions of times more important to them to keep pennies around. Not many citizens are going to write our Congressperson, much less hire a lobbyist, to get rid of pennies, so unfortunately, the zinc lobbyists are pretty much free to set the terms of this debate in Washington.
But maybe that's OK. Just as we lose valuable time that we could be putting to better use when we stop and pick up a penny off the ground, do we really want our Senators spending their valuable time debating pennies, or are there other, more important economic problems they should be working on?
Even though the US economy might lose hundreds of millions of dollars every year to the inefficiencies of pennies, it's the political economy in Washington, where Congress only has a limited amount of time to deal with thousands of issues, minor and major, that makes me expect that my pockets will be burdened with near-worthless coins for years to come.Tweet
Commercial Confidential tracks Maine's business leaders and economic indicators.
I'm an economics wonk and an online content producer for the Portland Press Herald.
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