Pennies are so cheap that Andre Balazs covers the floor of the Standard Hotel with them. Image credit Lloyd Alter
Some have suggested that the drive to replace the dollar bill with a coin is driven by western mining interests, while the bill is being defended by eastern paper interests. But
Jim Kolbe, the former Republican Party Congressman from Arizona and now honorary head of the Dollar Coin Alliance behind the COINS act that would pull the dollar bill out of circulation in America. (see Pocket Change We Can Believe In: Republicans Introduce Bill To Retire Dollar Bill) Back in 2002 he introduced the Legal Tender Modernization Act to eliminate the penny.
Doing so makes more sense than ever; the penny just isn't worth much anymore. A nickel is worth today what a penny was in 1972. Some more reasons for eliminating the penny:
Back in the Depression, they were worth something.
Production at a loss -- As of March 2008, it costs about 1.7 cents to mint a penny. As of 2007, even the price of the raw materials it is made of exceeds the face value, so there is a risk that coins are illegally melted down for raw materials.
Lost productivity and opportunity cost of use -- With the average wage in the U.S. being about $17 per hour in 2006, it takes about two seconds to earn one cent. Thus, it is not worthwhile for most people to deal with a penny. If it takes only two seconds extra for each transaction that uses a penny, the cost of time wasted in the U.S. is about $3.65 per person annually, about $1 billion for all America. Using a different calculation, economist Robert Whaples estimates a $300 million annual loss.
Limited utility -- Pennies are not accepted by all vending machines or many toll booths, and pennies are generally not accepted in bulk; however, Illinois does accept pennies in its toll booths. In addition, people often do not use cents to pay at all; they may simply use larger denominations and get pennies in return. Pennies end up sitting in jars or are thrown away and are not in circulation. Economist Greg Mankiw says that "The purpose of the monetary system is to facilitate exchange, but... the penny no longer serves that purpose."
In Canada, retailers have begged the Mint to get rid of the penny, like they did in Australia and New Zealand.
The two most often cited reasons for getting rid of pennies by retailers are that they cause them to carry too much change and they are practically worthless. In fact, the vast majority of retailers say they allow customers to purchase a product even if they are a penny or two short.
A few months back I wrote that it'sTime To Ditch The Penny; It Is Useless and Bad For The Environment, in which I noted the impact of mining the zinc necessary to produce four billion pennies per year.
Certainly it would be easier to accommodate the new dollar coin in the tills of the nation if the penny's spot was given up.