“Thirty cents,” the label on the lollipop jar read.
“What a sweet deal — I’ll take the cola-favoured one.” I dug into my wallet for change, walked up to the counter and handed the cashier thirty cents — thirty pennies, to be exact. Instead of a lollipop, I received a lesson in Canadian law.
The Currency Act of Canada explicitly states that nobody has the legal obligation to accept more than twenty-five pennies as legal tender for any transaction. This means my lollipop, which cost thirty cents, could not be fully paid for with thirty pennies. The cashier refused my payment. “Great,” I thought as I left, “If these pennies can’t even buy me a lollipop, there’s not much else they’re good for. They should be removed from circulation.”
This is the idea behind a growing body of consumers and retailers alike who are supporting the abolishment of the one-cent piece. Pat Martin, a Winnipeg MP, drafted a bill in 2008, proposing that the penny be eliminated from circulation. The Senate has since responded by launching a study concerning the overall utility of the penny in the Canadian economy. The report will be published by the end of this year.
But why kill the penny? Some, like Pat Martin, see it as a cost-cutting measure. These days, a penny can’t even buy a penny. The cost to manufacture one is estimated at about 1.5 cents. This figure heads up to 4 cents when you factor in overhead costs like shipping and handling. The cost of keeping nearly thirty billion pennies in circulation, plus the difference between the sum of the costs and the face value of the coin, known as the seigniorage, is estimated to cost the government, and ultimately the taxpayers, at least $130 million annually. This number gets larger with each passing year.
Courtesy of inflation, the cost of producing pennies will increase, due primarily to higher labour costs and rising metal prices. Conversely, the face value of the penny is pegged at one cent. This scenario leads to an ever-growing deficit in the seigniorage of the coin and the continuous increase in the overall cost of producing, distributing, and circulating the penny. Inflation will also continue to devalue the penny and lower its purchasing power. The penny’s significance will diminish until we are essentially left with, by one senator’s account, “a piece of currency that, frankly, lacks currency” and costs more than it’s worth. Now where is the sense in that?
Okay, maybe the penny is benefiting the Canadian economy in some way that offsets the cost of circulating them? This seems unlikely, as it is estimated that the penny is used by only 37 per cent of Canadians. The rest of the unused pennies are presumably placed inside piggybanks and tossed into water fountains — or through other creative means, they vanish into oblivion. This hoarding or disposing of pennies, rather than depositing them back into circulation, clearly demonstrates the coins’ futility. A survey in 2007 commissioned by the Royal Canadian Mint found that only one in five small retailers and one in three consumers opposed the elimination of the penny. Over half of those consumers who were in favour of removing the penny cited the penny’s “inconvenience” or “uselessness” as its main drawbacks.
In addition to the frustration of having to carry them around and then finally fish them out from the bottom of your pocket to use them, or of the cashier having to give you back the exact change, there is also a cost associated with the amount of time this adds to any cash transaction. An article published in Discover found that it takes “up to three seconds longer to complete a transaction that involves pennies.” This may not sound like very much, but with tens of millions of such transactions happening each year, we’re wasting a heck of a lot of time and money.
So what’s the verdict? The penny is charged with being an inconvenience — a complete and utter letdown in today’s fast-paced, every-second-counts economy. It is charged with being impractical to use as its face value continues to fall into the gutter — literally. Finally, it is charged with being a burden to taxpayers, as it costs well over $100 million annually to keep it in circulation. We’ll have to wait until the Senate provides its testimony, but at the end, I’m seeking the penny’s abolishment from circulation.
