Pennies are an annoyance to carry around and to use?and they cost more to make than they?re worth. There?s always a shortage of them because people either throw them away or collect them in jars. But if the penny was eliminated, as some economists suggest, would rounding prices to the nearest nickel end up costing consumers more money? Economist Robert M. Whaples has discovered it wouldn?t and says, “It’s time to eliminate the penny.”
Whaples estimates that the US loses about $900 million a year on penny production and handling. The cost is mainly due to the rising cost of zinc, the metal that makes up 97.5% of the penny, as well as to the costs of minting and transportation. Whaples says, “The cost of making our money, the penny, is now more than 1 cent (per penny).”
In a penny-free market place, what consumers pay at the cash register would be automatically rounded to the nearest nickel for cash transactions. Most retail prices end in a 9, so customers don?t realize the actual cost of the item (our store does this too). Because of this, proponents of keeping the penny say that rounding prices would make them all go UP. Whaples investigated and found that this isn’t the case.
He looked at data from cash transactions at 20 locations of a gas station and convenience store chain in Alabama, Georgia, North Carolina, Pennsylvania, South Carolina, Tennessee and Virginia. He rounded all prices to the nearest nickel, taxes included and says, “Customers wouldn’t lose from rounding our current prices, these data say. In fact, I found that customers gain just a miniscule amount, about 1 cent for every 40 transactions, which really amounts to zero. The convenience stores and the customers basically broke even.”
He thinks the coin we should be using is the $1 coin because in cash registers, “There’s this cash drawer sitting there with four slots for coins. Currently, there’s (a slot for) a penny, a nickel, a dime and a quarter. If you freed up that penny space, there would be an open place and, naturally, we would move to using a $1 coin. The Federal Reserve has estimated that replacing paper $1 bills with more durable $1 coins could save $500 million a year.”
Let’s just hope we wouldn’t use the money to start more wars.
Art credit: freeimages.co.uk
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