Monday, April 11, 2011
WHY I HATE PENNIES, pt. 1
Pennies should no longer exist. For every citizen in the United States, with the exception of the company that is the primary provider of the zinc used for the pennies, called Jardon Zinc Products, Pennies are incredibly expensive and problematic. Cost more than they are worth, inconvenient as a useful monetary value, and useless for anything practical today.
The cost of a penny is largely dictated by the materials used to make it. Pennies contain 97.5% zinc, with 2.5% copper to give them their distinctive coppery color. Prices of these metals have risen recently in response to inflation, an increase in prices due to more money getting circulated in the economy, and increasing regulation of mining, which has made the cost of metals extraction much higher. As of May 2010, it costs about 1.67¢ to mint a penny, making the face value of a 1¢ penny less than its actual manufacturing value. In addition to the penny, the nickel also has a physical value, which is higher than its face value. Nickels cost around 7.7¢ US to make, which is about 64.9% more than its face value. Other currency, such as dimes and quarters, costs much less to make. The face value of a quarter may be 25¢ US, but it only costs 10¢ US to make one.
It is unlikely that the cost of production will ever fall below one cent, and with more pennies being made each year, and like other government agencies such as the United States Postal Service, the Mint is expected to be financially accountable for their specific tasks, and the business practice of distributing something with a value less than its manufacturing cost is obviously jeopardizing their financial accountability. If creating a penny is costing more than what it is worth, we are technically throwing away money, and the resources to make the penny.
Pennies are extremely inconvenient because they are not accepted in most places that we generally use coins, like vending machines or toll booths, and pennies are generally not accepted in bulk. There are even machines that stretch pennies out for souvenirs. People often do not use cents to pay at all, they are much more likely to simply use larger denominations and get pennies in return. The National Association of Convenience Stores and the Walgreens drugstore chain surveyed transactions throughout multiple stores, and have estimated that handling pennies adds 2 to 2.5 seconds per cash transaction. Assume that the average citizen makes one such transaction every day, and in turn, wastes 730 seconds a year. In 1948, the average wage in America was about $1.20 an hour, or about $2,900, which means if a penny took less than 30 seconds to pick up, save, and continue about your day, it was much worth saving. The average worker today earns just over $36,000 a year, or about 0.5 cents per second, so by this basis, if you find a penny on the ground, it is literally not even worth your time. When accounting for the entire US economy that fits into this category, That's going to add up to about $300 million per year for lost time alone.
The "give a penny, take a penny" trays, dishes of pennies which you can take for free if you want them, or dump off your extra pennies into, at convenience stores and elsewhere reflect the fact that most people realize nowadays, the penny has fallen so much in value, that it is mostly a waste of time to worry about. It's free "money" which nobody bothers to take because it has no value. The trays save the seller time, and the buyer the inconvenience of having them. "When people start leaving a monetary unit at the cash register for the next customer, that unit is too small to be useful," argued Harvard economics professor Gregory Mankiw in a 2006 Wall Street Journal article
Will continue with part 2 later!