Canada Kills The Penny, And So Should We
Several years after it got rid of its paper dollar in favor of a coin, Canada is now getting rid of its lowest denomination coin:
Canada will withdraw the penny from circulation this year, saving taxpayers about C$11 million ($11 million) annually and forcing retailers to round prices to the nearest nickel, the government announced in its budget today.
The Royal Canadian Mint, which has produced 35 billion pennies since it began production in 1908, will cease distribution this fall due to the coin’s low purchasing power. Production and handling cost for the one-cent coin are a C$150- million drag on the economy, according to a 2006 study by Desjardins, a Quebec City-based bank.
“Pennies take up too much space on our dressers at home,” Finance Minister Jim Flaherty said in the text of his budget speech in Ottawa. “They take up far too much time for small businesses trying to grow and create jobs.”
Business groups welcomed the move, which follows other countries such as Australia, Brazil and Sweden, and economists said it would have little impact on inflation.
“If there’s a rounding up, you’d see a rounding down somewhere else,” said Craig Wright, chief economist at Royal Bank of Canada.
The savings to financial institutions alone may be about C$20-million a year, as banks reduce transportation, storage and handling costs, the study estimated.
It costs the government 1.6 cents to produce one penny, which has been made of copper-plated zinc and copper-plated steel since 1997.
The situation is actually even nuttier here in the United States, where it costs 2.4 cents to produce each penny, but efforts to eliminate the penny have always died in Congress. The President’s new budget included a proposal to allow the US Mint to study the use alternative metals in coin production in the hope that this would reduce costs, but that’s likely only a short term measure. Given its almost non-existent purchasing power, there’s really no rational reason to keep pennies around. This is a Canadian idea we should think about doing ourselves, it seems.
Photo via Wikipedia under Creative Commons License
You want to put all 99-cent stores out of business?? That seems a bit harsh.
Everybody knows that elimination of the penny is the pro-slavery position of unreconstructed pro-confederate libertarians.
As a practical man, however, I can be appeased by giving Lincoln the dime.
He’s on the five dollar bill.
By the way, we also should consider getting rid of the nickel.
Cash is overrated. Get rid of it all. The only time I use cash anymore is at the vending machines at work becuase our IT department is too lazy to hook up an ethernet port in the break room so we can put in machines that use debit cards.
How do you tip baggage handers etc.?
Or are you one of THOSE people?
Yes, dammit, yes! Get rid of the effin’ penny! A penny also has more than a penny’s worth of metal in it! Some people are melting them down…stop the madness, I tell you!
@Stormy Dragon: I find tipping with pennies reveals the hidden secessionist in many baggage handlers.
I don’t mean tipping with pennies. I meant in response to the “I don’t need cash at all” remark. Doormen, baggage handlers, etc. rarely take credit cards.
I agree the penny and probably the nickle should go but not cash. I use my debit card to get cash at the ATM and pay cash for nearly everything. I don’t like computers keeping track of whta I buy where. Yes I’m an aging hippie who doesn’t really trust anybody.
While we are at it we should abandon pricing gasoline at
$3.99 and 9/10 cents. It might as well be an even $4.00.
@ernieyeball: Yes!! From there we can eliminate all fractional price quotations for such items as stocks, bonds, commodities and mutual funds. If oil closes a day’s trading session at $103.29, for example, that really means that it closed at $103.00.
I’ve been living in Melbourne, Australia for the last 7 months and I will say that I don’t miss the penny (5 c is the lowest coin). The problem is that instead they use 1 dollar and 2 dollar coins, which make the change problem even worse. Remove the penny, round up or down to 5 cents and keep the dollar bill. Problem solved.
@Stormy Dragon: It’s called a smart phone with a Square D ap installed on it. In fact there are several places like PayPal, Intuit, and Square that let you swipe debit and credit cards from any android or Ios smartphone, Ipod touch, or ipad. The comic and game shop I own uses it as one example as does several of the coffee shops in town.
@Vast Variety: It’s a good thing that everyone has a smartphone with Android or iOS, or plastic to use, or whatever. And it would be no problem to force anyone who wants tips to purchase and carry a device so that they can receive them.
I’d imagine that the banks and transfer people would love this plan, given that they make pennies on the dollar of every transaction.
The thing about the penny (and the nickle, though one step at a time) is that it is economically inefficient. Right now, though, so are the sorts of transfers you’re talking about, except under specific circumstances (long-distance transactions, for example). It’s just that vendors aren’t generally allowed to charge the user for the inefficiency (and, given the complexity of interchange fees and whatnot, trying to do so accurately might even create more inefficiencies). If people had to pay an extra few cents on every dollar as well as a transaction fee every time they used their card or electronic payments, we’d use them less frequently. But right now they’re absorbed by the vendor and/or passed on to all consumers whether paying with cash or otherwise.
I’d be fine with killing the penny and and the nickel immediately. Absolutely no reason for them to exist at all.
The nickel is the only money that us poor people can afford to save that has any real value to it.
F*ck it! Everything is five bucks!
Great, most people’s thoughts aren’t worth a penny and you want to jack up the price.
You obviously have never been in an area hit by disaster. Where the power and comms lines are down for weeks. Where cash is king and plastic is only good for scraping mud off your shoes. There is no way to make electronic transactions survive a disruption of power or comms. And trust me, if you knew how easy it is to fall back to the asynchronous world, you’d be worried.
I’d support it, as long as the Canadians apologize to us first. Given that they’re Canadians, that shouldn’t be a problem.
Well, the problem with that is that the government (or your wife) can then track every
pennynickel you spend. Is that really a good thing?
I’m not onboard with the cashless society (for the reason anjin-san points out), but yeah, goodbye to the penny and I’d probably be okay with the nickel going down, too. Our politicians should be embarrassed that they’ve been shown up again.
And while we’re at it, the health care ….
BTW, after our last conversation I did go put my spare jar of change through CoinStar and got a Starbucks card back. So I did my part to reduce coin costs. Of course, where I used to have a jar of change gathering dust on my dresser, now I have a Starbuck card …
@Trumwill: “The thing about the penny (and the nickle, though one step at a time) is that it is economically inefficient.”
And the deification of efficiency has produced such a marvelous economy and broader society, hasn’t it?
@MBunge: So you’re pro-waste, yes? Is that the stance we should take on everything?
Good article here on how economic efficiency must be balanced against other values, and as a sole goal would yield an inhuman society.
(I don’t see any non-efficient values in keeping the penny, though I do see them for keeping cash.)
Plastic, gold, and ammunition. That’s all you need. And this lamp…and maybe this chair
Silly Canadians. NOBODY is going to round DOWN. Every price will be reconfigured so that after sales tax is applied a round UP will be arithmetically required. BTW…the penny is gone only for cash transactions.
Apart from the fact that your cynical assumption could only be applied to single item sales with any consistency, do you really think that the chance to make an unwarranted four cents on a transaction will override competitive and marketing pressures on pricing?
Yes, we can all get chips put in our hands…….
I think cash is going to be around for a long, long time, and I’m glad for it. I know the guy at the flea market can take credit cards now via his iPhone, but with concerns of identity theft do I really want to go that route? And in some cases even an honest man doesn’t want a paper trail.
As for the penny – the most important function it serves these days is to foster a sense of community by way of those “leave a penny, take a penny” trays next to the register in convenience stores. I also wonder how much charities would be affected, if people who hate pennies stopped dropping them in the donation jars next to most cash registers.
You understand that it isn’t just them. As recently as 1973 our current penny was worth a nickle. Inflation adjusted.
Ever pay a $30.00 Parking Ticket with Pennies? I have and it cost the State a half hour overtime for the 3 Wenches behind the counter ’cause I made sure I went in to pay 3 minutes before quittin’ time.
@J-Dub: How ’bout meltin’ the pennies and make your own ammo? I already do it with lead, just need a hotter kiln……..
@Wang Chung: Boom, penny shooter, problem solved: http://www.youtube.com/watch?v=x9tGSPLK5EE
Get rid of the penny.
Round all transactions down. So $.99 becomes $.95. This would disproportionately help the poor. :D.
The consumer wins – they pay less. The retailer wins – they spend less on transportation / other minor costs. The gov wins – they spend less on minting these coins.
No more problems.
@Chris: Except that you know they wouldn’t do this. You’d get everything rounded up to a dollar amount.
I’d be ok with getting rid of the penny if and only if we included sales tax in the price. Otherwise what we’re going to get is:–>X.99 prices get rounded up, then we calculate the sales/municipal tax/whatever, which gets added on, then we’ll round up AGAIN.
Someone’s going to make out like a bandit, but it isn’t going to be the consumer.
(By the way, Japan reintroduced the 1-yen coin when they added the 3% consumption sales tax.)