American lawmakers have repeatedly tried to eliminate pennies in recent years, but the penny remains a stubborn, and often annoying, part of American life. But because the COVID outbreak has made people afraid to touch cash, some believe the days of the penny are finally numbered.
“I think this is going to kill the penny in 2 years,” says Arik Shtilman, CEO of global payments company Rapyd.
Shtilman notes that other countries, including Ireland and Canada, dumped their pennies nearly a decade ago, and that governments around the world see the pandemic as an opportunity to reduce dependence on cash, a form of payment that is inefficient. but also unsanitary.
In a recent poll, Rapyd found that the majority of Americans are reluctant to handle cash and 45% are in favor of eliminating the penny. Shtilman believes this trend will accelerate given the number of people under the age of 40 who barely touch cash, let alone use pennies.
There is also a strong economic case for eliminating pennies. In 2018, the US Mint lost $ 69 million making pennies, and those costs are likely to rise in light of rising copper and zinc prices. This year, every penny will cost the mint two cents, an inefficiency that could be eliminated simply by ditching the pennies.
Pennies (and nickels) are expensive
In 2019, it cost 1.99 cents to make every penny, leading to a loss of more than $ 72 million on the 7.3 billion cents shipped for the year, according to Mint’s annual report. (The same is true for nickels, which cost more than 7 cents to make.)
Those losses have sparked a long-standing debate over whether the United States should continue to bother minting them.
Because pennies aren’t worth much, one researcher found they are worth less than the time it takes to fumble through your purse or pick one up from the street, are exchanged less frequently, and are out of the money supply faster than others. coins. . That means the Mint must produce more to keep up with that loss. Last year, pennies made up more than half of the total number of coins sent by the Mint.
So if America got rid of the humble penny, it should have a lot more time and money on its hands to make other more valuable coins.
Why it’s hard to get rid of pennies
Sure, it could be tricky for the idea to gain traction at a time when the pandemic is affecting so many other areas of life and when lawmakers have a lot on their plates.
Critics say eliminating the pennies would be a burden on companies, which would have to adjust their pricing policies. That argument could be strengthened during the pandemic, when companies already have to quickly adjust their operations to stay open and profitable.
But in countries that have dumped their pennies, including Canada, many companies simply round their prices up or down to the nearest penny on record, a practice that’s likely less complicated than what other companies have had to implement in the last months. Some fear that price rounding could hurt low-income consumers, who are more likely to use cash and have been disproportionately affected by the pandemic. But experts say the effects would balance out; some prices would be rounded up and others would be rounded down.
