The penny, officially known as the United States one-cent coin, has been in circulation since 1793. Over the years, it has undergone numerous design changes, but it remains a symbol of American heritage and the country’s economic history.
Abraham Lincoln’s profile has graced the penny since 1909, commemorating the centennial of his birth, and the coin has become an iconic part of U.S. currency. However, the penny’s relevance in today’s economy is under increasing scrutiny, as its value has diminished due to inflation and changes in consumer behavior.
While the penny was once an essential part of everyday transactions, its role has significantly decreased. As inflation drives up the price of goods, a penny today has far less purchasing power than it did in the past.
In fact, some argue that the penny has outlived its usefulness in a digital age where cash transactions are declining. Despite this, there are strong proponents for keeping the penny, who emphasize its cultural value, utility in precise pricing, and role in charity drives.
On the other hand, critics point to the inefficiency of producing a coin that costs more to mint than its actual face value, as well as the environmental impact of its production.
Countries like Canada, New Zealand, and Australia have already phased out their lowest denominations, raising the question of whether the U.S. should follow suit.
This article will explore the 10 pros and 10 cons of keeping the penny in circulation, providing a comprehensive look at its historical significance, practical uses, and the challenges associated with maintaining it as part of modern U.S. currency.
Pros Of Pennies
1. Cultural And Historical Significance
The penny is deeply rooted in American history and culture. As the first coin minted by the United States, it holds symbolic value, representing the country’s long economic history. The depiction of Abraham Lincoln, one of the most revered figures in U.S. history, further enhances the coin’s status as a cultural icon. The penny serves as a reminder of America’s formative years and is a part of numerous traditions, including the “lucky penny” folklore. For many Americans, eliminating the penny would feel like erasing a small part of the nation’s historical identity.
2. Allows For Exact Pricing
Pennies play a crucial role in maintaining pricing precision, especially for businesses that use psychological pricing strategies. Items priced at $9.99 or $4.95 rely on the penny to make transactions exact. Without pennies, prices would need to be rounded up or down, which could lead to higher costs for consumers over time. This pricing precision helps maintain trust between businesses and consumers, as customers can feel confident they are paying the correct amount without the need for rounding adjustments.
3. Important For Charity Donations
Pennies are often donated to charity drives, as people are more willing to part with small change. Schools, community organizations, and nonprofits frequently hold penny drives, where large quantities of pennies can add up to significant sums of money. These pennies, which many individuals might otherwise leave unused or discard, can make a meaningful difference in fundraising efforts for organizations that rely on small donations to fund their activities.
4. Teaches Children About Money
For children, pennies provide a simple and effective way to learn about the value of money, counting, and financial responsibility. They serve as an accessible introduction to currency for young learners, as their low value makes them ideal for teaching children how to manage, count, and save money without the risk of losing significant amounts. Pennies are a great tool for parents and educators to introduce financial literacy and the importance of saving small amounts of money, which can add up over time.
5. Supports Low-Income Consumers
Eliminating the penny could disproportionately affect low-income individuals who rely on cash transactions for everyday purchases. Even small increases due to rounding up prices could add up over time, impacting those who are already living on tight budgets. The penny allows for more accurate pricing, helping consumers pay the exact amount rather than rounding up. This ensures that individuals on a strict budget do not lose extra cents on each transaction, which could accumulate into significant sums over the course of a year.
6. Symbol Of Frugality
The penny has long been a symbol of thrift and saving. The phrase “a penny saved is a penny earned” reflects the broader cultural value of financial responsibility and frugality. For some, the penny represents the idea that even small amounts of money are worth saving, contributing to a mindset of careful financial management. In an increasingly consumer-driven society, the penny serves as a reminder that every little bit counts when it comes to financial responsibility.
7. Jobs In The Minting Industry
The continued production of pennies supports jobs in the U.S. Mint and related industries, including the suppliers of raw materials like copper and zinc. Eliminating the penny could lead to job losses in these sectors, particularly for workers involved in the production, transportation, and distribution of the coins. The impact would extend beyond the minting industry, affecting suppliers and peripheral industries that contribute to the materials and processes needed to keep pennies in circulation.
8. Useful For Small Transactions
While cash transactions are becoming less common, pennies are still useful for small purchases and making exact change. Some vending machines, parking meters, and other coin-operated devices still accept pennies, making them relevant for certain low-cost transactions. In particular, businesses that rely on cash sales, such as small vendors, still benefit from using pennies to ensure that their customers receive the correct change without having to round up or down.
9. Pennies Have Collectors’ Value
Pennies have value beyond their use in transactions, particularly for coin collectors. Rare and old pennies, such as the 1909-S VDB penny or the 1943 steel penny, are highly sought after by numismatists and can be worth thousands of dollars. The continued circulation of pennies ensures that collectors can continue to find and trade rare coins, while new collectors are drawn into the hobby through the thrill of finding older or more valuable pieces in circulation.
10. Helps Maintain Price Stability
By keeping the penny in circulation, prices for goods and services can remain stable. Without pennies, retailers may round up prices to the nearest nickel or dime, potentially leading to higher costs for consumers over time. The penny ensures that consumers can pay the exact price, avoiding the inflationary impact of rounding up. Maintaining this price stability is particularly important for businesses that rely on small margins or that serve customers who prefer precise pricing.
Cons Of Pennies
1. Cost Of Production Exceeds Value
One of the most compelling arguments against keeping the penny is that it costs more to produce than it is worth. Currently, it costs the U.S. Mint around 2.1 cents to produce a single penny, meaning the government loses money on every penny minted. This financial loss adds up to millions of dollars annually, raising questions about the economic efficiency of continuing to produce pennies. The cost of production exceeding the coin’s face value is an unsustainable model in the long term.
2. Limited Purchasing Power
Due to inflation, the penny’s purchasing power has diminished significantly over the years. What once could buy a loaf of bread or a soda now can’t even purchase a piece of candy. In today’s economy, a single penny holds very little value in everyday transactions, leading many to question its relevance as a form of currency. Its limited purchasing power means that pennies are often regarded as more of a nuisance than a useful currency for most people.
3. Slows Down Transactions
Using pennies in transactions can be time-consuming for both consumers and retailers. Counting out pennies to make exact change slows down the process of purchasing goods, leading to longer lines at cash registers. For businesses, the extra time spent handling pennies can add up, creating inefficiencies that affect overall productivity. This delay, while seemingly small in individual cases, can accumulate across multiple transactions, leading to frustration for both customers and business owners.
4. Environmental Impact Of Production
The production of pennies requires significant amounts of raw materials, including zinc and copper, both of which must be mined and processed. This process consumes energy and contributes to environmental degradation. The minting process itself also has a carbon footprint, raising concerns about the environmental impact of producing billions of pennies each year. As awareness of environmental sustainability grows, the continued production of pennies may be viewed as an unnecessary drain on natural resources.
5. Inconvenient For Businesses And Banks
Handling large quantities of pennies can be cumbersome for businesses and banks. Pennies take up more space and are heavier relative to their value compared to other coins. Many banks no longer offer free coin-counting services, making it harder for individuals and businesses to deposit pennies without incurring fees or spending time rolling them. For businesses that handle cash regularly, this adds an extra layer of complexity and cost in managing low-value coins.
6. Other Countries Have Eliminated Low-Denomination Coins
Countries such as Canada, Australia, and New Zealand have successfully phased out their lowest-denomination coins without significant economic disruption. These countries have adopted rounding systems that smooth out the transition, suggesting that the U.S. could also eliminate pennies without negative consequences. The experience of these countries serves as a blueprint for how the U.S. could handle the transition, offering lessons in minimizing disruption for consumers and businesses.
7. Waste Of Resources
Many people view pennies as a waste, often discarding them or leaving them unused in jars and drawers. This behavior suggests that pennies no longer hold enough value for many individuals to bother using them in transactions. The wasteful nature of pennies raises questions about whether it is worth continuing to produce a coin that many people don’t even use. In a society where pennies often end up forgotten or discarded, their continued production seems counterproductive.
8. Rounding Concerns Are Minimal
While some worry that eliminating pennies would lead to price increases due to rounding, evidence from other countries shows that rounding tends to even out over time. In fact, prices are often rounded down as frequently as they are rounded up, minimizing any negative financial impact on consumers. In Canada, for example, the removal of the penny did not lead to significant price changes, as most retailers and consumers adapted quickly to the new system.
9. Increasing Trend Toward Cashless Transactions
As digital payments become more prevalent, the need for physical coins, including pennies, has diminished. Mobile payments, credit cards, and contactless transactions are now the preferred methods of payment for many consumers, making the penny increasingly irrelevant in a world moving toward cashless economies. The shift toward cashless transactions further weakens the argument for keeping pennies in circulation, as fewer people rely on cash for everyday purchases.
10. Lack Of Use On Vending Machines and Devices
Most modern vending machines, parking meters, and coin-operated devices no longer accept pennies, rendering them useless in certain situations. As technology advances and fewer machines are designed to accommodate pennies, their utility continues to decline, raising questions about their relevance in today’s economy. The lack of integration into modern payment technologies further diminishes the penny’s role in everyday transactions.
Conclusion
The debate over the penny’s future highlights the tension between tradition and practicality. While pennies hold historical significance and offer benefits such as precise pricing and support for charitable donations, their role in the modern economy is increasingly questioned. The cost of producing pennies now exceeds their value, and inflation has rendered them nearly obsolete in day-to-day transactions. Furthermore, their environmental impact, inefficiency in business transactions, and declining use in a cashless world all point to potential reasons for phasing out the penny.
On the other hand, the penny remains an iconic symbol of American history and culture, and eliminating it could lead to small but noticeable price increases for consumers. Whether or not the U.S. should follow other countries in phasing out its lowest-denomination coin remains an open question, but the pros and cons of pennies highlight the complex factors at play in deciding their future.