Penny Foolish or Penny Wise?

The penny costs more to make than its face value, so why is it still around?

One quarter, two nickels, three dimes, zero pennies. This is what you may find in the average pocket. Most people do not carry or use pennies on a daily basis. If we see a penny on the ground, we are likely to pass right over it. So why do we need the penny? Many politicians and economists are proposing to eliminate the penny altogether. The penny currently costs more to make than it is worth, so that fact alone is reason to get rid of them. So why have we kept them around and what would happen if we got rid of them?

It may be surprising to find that pennies aren’t the only coins that cost more to make than their face value. In 2011, the nickel cost $0.1118 cents to make, while the penny cost $0.0241. From the infographic, we can see the true cost of nickels and pennies. Seigniorage is the difference between the total cost of production and the actual value. In 2011, this came out to be $60.2 million for pennies and $56.5 million for nickels.

Proponents of the penny argue that the formula for making them should change. Over the last 30 years the penny has been made with 97.5% zinc and 2.5% copper. The nickel is made of 75% zinc and 25% copper. It is surprising that the nickel contains even more copper than the penny. President Obama has proposed altering the materials in the penny and nickel to decrease their cost. People opposed to keeping the penny believe this will only increase the likelihood of counterfeiting the coin.

American’s For Common Cents says that if we moved from the penny to the nickel as the lowest denomination coin it may create public anxiety over higher prices. About 77% of Americans worry that prices would be raised if the penny was abolished. Professor Raymond Lombra of Penn State found that rounding to the nearest nickel would cost consumers more than $600 million annually. About 59% of Americans worry that getting rid of the penny would cause confusion when purchasing items.

Whether you are against or for the penny, it will be interesting to see how this controversy plays out over the coming years. Next time you see a penny on the ground, pick it up and consider your thoughts on whether it should be eliminated or kept around.

12.03.29-Penny-to-Paper-How-Much-Does-It-Cost-to-Make-US-Currency

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