The True Cost of the Penny

Here at Think, we’re not just concerned with the big political issues. We know the little stuff matters, too. Like a $50 million government boondoggle passing right under taxpayers’ noses year after year. Compared to the federal budget, that doesn’t seem like much, but $50 million is real money. That stuff adds up. You know what’s not real money? A penny.

Contrary to popular belief, a penny isn’t actually made of copper—it’s made of zinc. (Or at least 98% of it is.) And the amount of zinc it takes to make a penny costs more than the value of a penny. That adds up to about a $50 million loss on pennies for the U.S. Mint every year. But that’s not the only way the penny costs us money. A study by a Wake Forest economist suggests that the penny costs Americans over $900 million annually simply by being a pain in the butt. Every customer that waits at a cash register for pennies they don’t even want is wasting time, and thus money—evidently more than a cent’s worth.

And for all that cost, what do we receive in return? A worthless piece of metal that’s good for nothing but clanging around in your pocket. Pennies have virtually no function in today’s world—they’re not worth enough to buy anything, and you can’t even use them in most machines that take coins. (You can’t pay with pennies in those machines that turn pennies into commemorative tokens!) In fact, two-thirds of pennies are immediately removed from circulation, thrown away or left to collect dust in jars.

Luckily, there’s an easy fix: just stop minting the darn things. But there’s a zinc lobby out there that would lose a lot of business if we ditch the penny—one man’s waste is another industry’s profit. (Check out their hilarious propaganda group, called “Americans for Common Cents.” While we’re here, let the record show I took it easy on the “cents” and “change” puns. I could have taken the easy way out, but readers, I’ve got your best interests at heart.) We make most purchases electronically anyway, and for those of you scared of being exploited by price-rounding, take a look at the actual price next time you buy gas. (Hint: it’s not a round number.)

Here’s my favorite way to explain the wastefulness of the penny (from that Wake Forest study): Assuming any person is making the average American wage of $17 an hour and understanding the principles of opportunity cost, the time it takes to stop walking and pick up a penny off the ground is worth less than one cent. Very rarely is a public issue so obviously one-sided—the only thing the penny’s got going for it is sentimentality. It’s time to put the penny in its place—alongside the quill pen, telegraph, those old bicycles with the one really big wheel and the other tiny wheel in the back—in the dustbin of history.

For a more detailed discussion on the penny, read this discussion from the Wall Street Journal.

– Matt McGuire, Editor-in-Chief