In 2017 alone, the United States Mint produced around 8.6 billion one-cent coins, or “pennies,” as they’re popularly known. Since the most recent number for the cost of producing the penny in 2016 was 1.5 cents per coin, that means the total cost of production in 2017 was somewhere around $129 million. It does not require the specialized knowledge of a renowned mathematician or numismatist to see that there is something wrong here. In 2016, the five-cent nickel also exceeded its face value in production at 6.32 cents per coin produced, but for the sake of simplicity, I will only be making the case for either the complete halt in production of or change in production materials of the penny. While this is certainly not a new debate, I think it is one that needs to be addressed sooner rather than later, because the longer this can is kicked down the road, the more money that we — the American taxpayers — lose.
United States one-cent obverse. Hover to zoom.
I will attempt to make the case for the total halting of penny production, but for those not convinced by that, I will additionally make the case for changing the current production materials of the penny to something that will bring the cost of production under one cent per coin. Since an effective method of argumentation is to first address counterarguments, I will attempt to debunk the objections to the eradication of the penny and use that to make my points in the process. The first objection (which hopefully is not a widespread one) is that the penny is one of the only ways for us to honor President Abraham Lincoln. For these naysayers, I would direct them to this:
U.S. $5 Series 2006 face.
Moving on, another much more reasonable objection usually points to a Gallup poll conducted in 2006 in which 55 percent of people surveyed favored keeping the penny, while 43 percent were in favor of eliminating it. While this only leaves around two percent undecided, this poll was conducted 12 years ago, and while I have found it difficult to come up with recent polls on the subject matter, it appears that at least the discussion is growing and media sources are increasingly calling for the end of the penny — not to mention Canada’s recent abolishment of their version. Another poll was conducted in 2012, according to an article on CNN Money, but it was conducted by one of the major groups advocating for the penny — Americans for Common Cents — which lobbies for keeping the penny in circulation. However, one of the funders for Americans for Common Cents is Jarden Zinc Products — which is the company responsible for selling zinc to the United States Mint and making zinc blanks for pennies. Unsurprisingly, the modern penny is composed of 97.5 percent zinc. In fact, the penny is the only modern small-denomination U.S. coin to contain zinc at all.
Various forms of zinc. Image by Alchemist-hp.
I have nothing against zinc personally, in fact, it’s my favorite element from the periodic table to ingest when I have a cold, but when private companies hold undue influence on public policy, I might have something to say about it. Since 1990, three bills have been introduced to halt production of the penny, and (spoiler alert) none have passed, despite significant public pressure on legislators to act. Pressure in the opposing direction from industries which benefit from the penny should be considered in this discussion, and it may not even be the zinc industry which is primarily to blame, as an excellent article from Tim Worstall on Forbes points out that companies which produce the blanks for pennies stand to lose more than the zinc industry should the penny cease to be produced. While zinc is toxic to some pets if ingested, according to a report from CBS News in April 2013, it is a cheaper metal to use for coinage than copper, so I’m actually in favor of considering more zinc alloys in coin production if it brings down cost. These concerns can also be mitigated by the proper storage of pennies, and if pet owners should be expected to protect their furry friends from other poisonous substances, then pennies should be included on that list as well.
Douglas Fairbanks as Robin Hood.
Now I will move on to the “Robin Hood” contention that halting production of the penny would hurt the economically disadvantaged, who tend to rely on cash only transactions, since a study by Raymond Lombra argues that eliminating the penny would impose what is called a “rounding tax” of around $600 million per year on Americans who primarily use cash transactions. However, I am not advocating for the penny to be removed from circulation, only that we halt its production — pennies would continue to circulate in the economy well after a halt in production. Let’s counter the point anyway: a group on the side of halting penny production, called Citizens to Retire the Penny, argues that rounding is neutral at the cash transaction level, and since transactions are faster without the involvement of low-value coins, the poor who tend to rely on cash transactions would actually benefit from its removal. This view is supported by Robert M. Beren Professor of Economics at Harvard University, Greg Mankiw, who quotes a finding by Sebastian Mallaby:
The National Association of Convenience Stores and the Walgreens drugstore chain have estimated that handling pennies adds 2 to 2.5 seconds per cash transaction. Assume that the average citizen makes one such transaction every day, and so wastes (to be conservative) 730 seconds a year. The median worker earns just over $36,000 a year, or about 0.5 cents per second, so futzing with pennies costs him $3.65 annually.
On February 15, 2013, President Barack Obama stated that he was open to halting the penny’s production in a Google+ Hangout when asked by John Green.
Mankiw goes on to say in his article, entitled “How to Make $1 Billion,” that after multiplying the previous figure cited by Mallaby by the number of American “getting rid of the penny would free up economic resources valued at about $1 billion a year.” Robert M. Whaples, professor of economics at Wake Forest University, also supports halting production of the penny and stated that the United States loses around $900 million per year on penny handling and production. Whaples also describes the rounding tax contention as a myth and favors the replacement of the $1 bill with $1 coins instead, which he contends would save an additional $500 million per year.
Going back to Mankiw, he makes another important point about the current role of the penny in the American economy in a separate post entitled “Resolutions for Another New Year.”
The purpose of the monetary system is to facilitate exchange, but… the penny no longer serves that purpose.
Pennies still make for excellent collector’s items, as seen with this U.S. coin collection featuring Lincoln cents from 1941 to 1974. This set also features two error coins and a description page. Image by Monocletophat123.
Pennies, in their current form, are a force for economic stagnation, as they are the most often to be unused by consumers and the Mint makes more of them than all other coins combined. It is understood fairly quickly by students of Economics 101 that the economy thrives when money is more frequently exchanged, not less. Most vending machines do not even accept pennies either, perhaps due to the amount of space that they would take up just to make one dollar.
While these are by no means all of the arguments against or in favor of halting the production of the penny, the debate appears to be shifting in favor of halting production of low-denomination coins in foreign countries such as Australia, Canada, the Netherlands, New Zealand, and Finland, which have all taken steps to eliminate their lowest-value coins from circulation with promising results. I by no means advocate for the abolishment of the penny as an acceptable form of currency, just the halting in its production, due to the increased cost of production relative to its value. Until we find a cheaper way to make pennies, I do not think that there is a strong enough case to be made to continue minting them, and even if we do, it appears that simply having coins with such low denominations brings more harm than good to the economy due to increased transaction times, inconvenience to both retailer and consumer, and stagnation. Let me know in the comments if you think we should keep minting the penny, just please don’t use the Lincoln argument if you disagree!
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I agree with all you’ve said, but there is another possibility. The truth is the reason it costs more than a penny to make a penny is because the value of the US dollar ain’t what it used to be. I respectfully suggest that the dollar be revalued significantly– perhaps by 20 times to give it some actual meaning again. In other words 10 dollar bills currently in circulation would become $1 bills, and so on. This would instantly mean that the cost to produce a penny would then be less than a tenth of a cent (0.075 cents to be exact) and the problem is solved!
I once worked briefly for a Plastic Cup Lid Manufacturer. Our Plastic was shipped into the Facility in Pellet Form. It was melted , extruded into Sheets. then vacuum formed into Lids and punched out and stacked as the finished Product.
When I think of Nickels and Cents I can see a raw material in ” coinified” form all ready to be fed into a production process and turned into some finished product. Isn’t Nickel used in manufacturing Stainless Steel? Well, what would be better than buying Shiploads of pure raw material and make your stainless steel? Ok, US Nickels aren’t pure Nickel, there’s some Copper and maybe something else in there. But cant you see our “Friends” the Chinese buying 85% of our Coinified Nickel and selling it back to us as Sheet and other forms of Stainless Steel? So conveniently packed in monster Ballistic Bags and Pallitised all really to take down to the Port of Philadelphia and ship it away to the friends around the world.
You just gotta love the money hungry doggs of capitalism. They would sell your body if you would only donate it to “Science” after you were done with it.
Something writers on this topic always forget is that the Mint makes money or seniorage on it’s other denominations (including paper money), enough in fact to offset cent and nickel production losses. Therefore, your essay is weak in my opinion. I would actually argue that the cent should be 95 percent copper again. That way senoiarge can go back to the public and our cents would actually be worth more than face. Never thought of that have you?!
Metal detectorist call them Zincolns. When we find them in the ground (and we find tons of them), alot of the time they are literally half gone. Even those that have been in the ground for less than a year are nasty and I assume undpendable. I have been detecting for 48 years, so this has evolved into my hobby. I separate all of my coins and have large jugs full of useless crap. Compare this to any copper cent from the 1700s until 1982. Those come out of the ground (except for wear and dirt), just like the day they were minted. I don’t want them to do away with the cent, but I do want to see them stop wasting money on both making them and making them out of something that desolves in the ground. If anyone thinks this is not a real problem, I suggest you find a detecting club and see for yourself. I would post pictures on here, but I don’t think I can or allowed.
I haven’t heard a word about the exorbitant weight of the worthless penny, nor the cost
of distribution. Add shipping to the manufacturing cost and the overall price exceeds 1.5 cents.
Frustrated merchants have been advocating elimination a very long time.
I was going to leave a comment about inflation, but it looks like Western Sage has beat me to it. I would add further that the buying power of the dollar has steadily decreased over time due to inflation. Now, they tell us all that inflation is great; it stirs the economy and keeps it growing. But, the real way to view inflation is that it is simply robbery. A monetary system is meant for one thing and that is a medium of exchange. Without it, it would be very difficult for us to exchange our services and goods with each other. Money simplifies this bartering system. Inflation or the watering down of the exchange medium simply makes our services and goods worth less. So in fact, they are stealing. The fact that we cannot make a penny in the same manner as many years ago is a disturbing window of how much they’ve stolen form us over the years.
Oh my, here we go again. Everyone has the answer on how to save our government money. While the cent and nickel may cost more than they’re worth, the mint more than makes up for it with the profitability that the dime and the quarter gives. Nobody advocating the cents demise ever brings that up, I wonder why?
The government is in debt up to its political ears. Does anyone really expect $128 million will truly off-set the trillions of dollars we owe? My experience with the government is that there will be no savings if the cent is abolished. If abolishing the cent does come to pass, that money “saved” will be spent somewhere else (such as a bridge to nowhere that no one will drive on, or sidewalks along interstate highways or some other such nonsense that they can dream up) and you will get nothing in return. There will be no tax reduction, there will be no rebate; you will get nothing. Where did all the money “saved” go when the presidential dollars were abolished?
The government’s job is the will of the people. If the people want a cent, then the government should just suck it up and give it to them. At least having the cent, whether it is spent or not, gives the people back something from our wastrel government.
I agree with David.
The zinc pennies deteriorate rapidly, so I would bring back the copper penny.
The fact that the penny cost more than a penny to make, is the fault of inflation.
Bitcoin offers the possibility of solving all of these issues, but will be fought against, as it removes the creation of currency from the governments hands.
You can’t make a penny out of copper and have it cost a penny. If you do, people will buy those pennies for 1 cent and go melt them down and sell it for 2 cents. Yes it is illegal to do in the US, so buy up the pennies in the US and send them overseas to melt. Just like you can melt all the Canadian pennies and nickles you find here in the US without breaking any law.
Aluminum or plastic would be cheaper (but aluminum will rot in the dirt too). I think it is better to just stop making pennies and round things off to the nearest nickel. I’d also get rid of the $10 bill (5’s and 20’s are fine). I notice many cashier tills don’t use 10’s, they stick them underneath. I’d also consider getting rid of the $1 bill and just use the $1 coin. Or vice versa. The time savings from not having so many different units of money would be the largest benefit.
Umm let me see we are p!ssin and moan!n about something that our govt makes that actually lasts for over 100 years (not a bad return on investment) talking about nickles and the old copper pennies. If we are concerned in cost then eliminating the dollar and making it a coin will far surpass the costs of making coins that so far have lasted more than 30 years, Sad I remember when my grandmother had a little change purse and money really meant something. Now you see people so lazy and a dollar so devalued they walk past and over coins. As to Tom D in SC that Bridge was not a bridge to Nowhere it was a bridge to Anchorage’s and Ketchikan’s future.
In Ireland, the Central Bank introduced the concept of rounding of cash payments, back in October 2015. At the till, retailers rounded the total amount due down or up to the nearest 5 cents. Retailers are still able to price goods at 99 cents or €1.99, for example, but only give cash change to the nearest five cents. Whilst customers could still offer 1c and 2c coins and demand the exact change, few if any did so.
Within weeks the 1 cent and 2 cent coins disappeared from circulation although they still remain legal tender. So if this has worked so well in Ireland it should be pose no problem for the US!
Then of course we could talk about how well our 50 cent, 1 Euro and 2 Euro coins circulate and how the 5 Euro (worth $6) is the smallest banknote – but that is another story!
Reference to Al’s comment regarding my comment of a bridge to nowhere. Gee Al, I was referring to the South Carolina bridge from nowhere to nowhere. As a point of order, neither bridge was funded.