When I was little I would always see the little trays on the countertops at the gas stations or convenience stores that said “take a penny, leave a penny” and I was confused as to why people would leave their money for other people to use because pennies seemed like a big deal to me back then. Now whenever I get change at one of these places, I always drop my pennies into the little tray, but keep the rest of my coins. Speaking from observation, I know that many of us do the same. And why do we do this? Because the penny has become worthless to us. This is one of the many reasons that economists argue that we should get rid of the penny: because we don’t value it anymore. We value the penny so little that we don’t care if we lose our pennies, some people even throw them away or get rid of them on purpose.
The cost of zinc and copper has increased so much that the cost of making pennies has become more expensive than the worth of the penny. The cost of making a penny is anywhere between 1.26 cents and 2 cents, which would lead us to believe that, since making pennies creates a dead weight loss, making pennies is not worth it. Literally.
We have also all experienced, or have been the impatient observer, of the struggle of trying to get exact change at the register and digging through pockets and purses for those few pennies. According to a study made by Walgreens and the National Association of Convenience Stores, this fumbling for pennies adds an average of two seconds per transaction. Given that about 107 billion cash transactions are were made per year in 2012 according to a US Federal Reserve Payments Study, using pennies therefore wastes 120 million hours of time per year if you take into account the time of both the customer and the employee. And time is money so we could see this as a trade off where if you weren’t spending this time on fumbling for pennies, you could be making money by working or something of that sort. At least that’s the reasoning that the people at retirethepenny.org have.
This video gets at many of the reasons why people think we should “kill the penny.”
But the penny is something that has always been around and many people are hesitant to leave it simply because it is tradition to have the penny around. But through an economic perspective, many people say that if the penny is removed, that prices will go up because merchants will round their prices up to the nearest nickel. A study done by Raymond Lombra, an economics professor at Penn State, estimates that consumers would end up paying a “rounding tax” of $600 million per year if prices were rounded up. But a more recent study by Robert Whaples, an economics professor at Wake Forest, shows that consumers as a group would break even if stores rounded to the nearest nickel. Regardless of whether prices are rounded up or down, this would mean that transactions at registers become slightly quicker in the absence of the few moments spent fumbling for pennies.
Another huge reason that people believe we should keep the penny is because charities would suffer a lot from the absence of the penny. Many charities hold penny drives because people are very willing to donate a bunch of pennies but once it comes to nickels, dimes or quarters, people are much less willing to part with those. Since the penny would no longer be in circulation, charities that use this as a primary source of donations would see a large decrease in donations.
So despite all the economic reasons in favor of getting rid of the penny, I don’t think we will be saying goodbye to the penny anytime soon, primarily because we are so attached to the idea of having a penny. We Americans don’t like to see change and we have a sentimental and nationalistic attachment to the penny and Lincoln.