In 2011, the United States government lost over $60 million through the minting of pennies. One-cent pieces now cost the government 2.41 cents, each, to produce. When the American cent was introduced in 1793, a typical annual salary for a teacher may have been about $60, so a cent would represent 0.016 percent of this person’s salary. That may seem insignificant at first, but a cent today represents 0.000025 percent of a teacher’s salary of $40,000 today.
In 1793, you might have expected a loaf of bread to cost about 4 cents. Today, a loaf of bread from my supermarket’s bakery is being sold for $2.69. The cent played a much more significant role in life when it was introduced in this country alongside the other coins and currency.
A few years ago, the Federal Reserve Bank of Chicago proposed an odd solution to the problem caused by the rising costs of producing the cent. The Chicago Fed suggested revaluing the cent to be worth five cents, like the nickel. Canada has offered what is probably the best solution for this particular dilemma: halting production of one-cent pieces entirely.
This fall, Canada will no longer produce the cent. Retailers will need to adjust prices for cash transactions, rounding to the nearest five cents. Electronic transactions will continue to be processed in one-cent increments, so no rounding will be necessary for debit or credit card transactions in Canada. All cents in Canada will eventually be pulled from circulation.
One concern is that the lack of cash prices in one-cent increments and the necessity of rounding will cause prices to increase overall, but Canada’s Ministry of Finance points to other countries that have eliminated the cent and have not experienced rising prices.
This is clearly the path the United States should take. The cent is a nuisance, and is expensive for the government (and public) to produce, and should be eliminated. A price difference of one cent is meaningless in today’s economy.