The debate over whether to keep the penny or discontinue it has intensified since the penny crossed the line of one-cent production cost per penny. In 2010, it cost 1.67 cents to produce each penny. Those who support getting rid of the penny argue that it is useless, inconvenient and takes up space that could be given to other denominations of currency.
Common Cents, an organization devoted to keeping the penny, runs an annual Penny Harvest and supports the penny largely because of its importance to charities. They support keeping the penny because pennies represent the most expendable part of pocket change.
A 2006 Coinstar poll found that 33 percent of American men and 22 percent of American women do not value spare change. Charities benefit from spare change because, since people do not care about it, they are more likely to give it away. Charities worry that if the nickel becomes the smallest denomination, then people will value change more. If that is the case, then people would be less willing to part with spare change for charitable drives.
No Increased Prices
If the penny is discontinued, then merchants must round all prices. It is unclear whether the rounding would be up or down. Proponents of the penny argue that shopkeepers would tend to round up, increasing prices.
One of the functions of prices is to provide participants in the economy with information about the scarcity, supply and demand for a particular good. Removing the penny removes grades of information that could be available to investors, consumers and manufacturers. The impact of the loss of the penny on price flexibility depends on its implementation. If only cash transactions are affected, then electronic transactions will continue to deliver more sensitive data. However, it could be biased because of the differences between segments of the population that pay electronically and with cash.
No Transition Cost
The discontinuation of the penny would require significant turnover. Shopkeepers would have to either change the prices on all of the items in their inventories or reprogram registers to round automatically when an item is charged. Companies would need to update their price catalogs. These adjustments are not costless, so there is resistance from some parties who do not want to pay transition costs.
Most Americans want to keep the penny. Their reasons differ. Some are opposed to change, and others are attached to the penny for sentimental reasons. Whatever the rationale, 58 percent of men and 73 percent of women wanted to keep the penny in 2006, according to a Coinstar poll. The decision to discontinue it would incur political backlash.
- Americans for Common Cents: The Penny's Importance For Charity
- Foldvary Says Keep the Penny; Dump the Sales Tax
- US Mint Cost to Produce the Penny and Nickel
- Americans for Common Cents: Support for the Penny
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Danielle DeLee began writing in 2010. Her areas of writing expertise include economic theory and applications, Russian culture and scuba diving. She holds a Bachelor of Arts in economics and international studies from Yale University.