Money Maxims: The Penny (or Once Again, Canada is Doing a Better Job)

By David Pilley on May 10, 2012

Canada is a more forward-thinking country than the United States. Our northern friends have enjoyed universal health care since the 1980s, same-sex marriage has been legal since 2005, and on Friday, the Royal Canadian Mint did something profound. As of May 4, 2012, the Canadian Mint no longer makes pennies.  Finance Minister Jim Flaherty promised in his March 29 budget that elimination of producing pennies would create immediate savings of $11 million (in Canadian dollars). Flaherty stated it cost 1.6 cents to make each penny, primarily because copper prices have more than tripled since 2000. At one point, it cost even more than this! A Canadian penny, weighing 2.35 grams, consists of a 94% steel or zinc core, 1.5% nickel, and 4.5% copper plating. The coins had previously been 95 to 98% copper before a transition to zinc and steel core, and, between 2006 and 2008, Canadian pennies made between 1942 and 1996 actually had an intrinsic value of two cents Canadian.

A budget was released at the end of March telling the Mint to get rid of the penny, and in just over a month, action happened. Why can’t we do the same in the States? The US should be taking note because we have our own penny problem.

Our very own Lincoln pennies consist of a 97.5% zinc core and 2.5% copper. This composition was changed after 1982, when they were made of bronze (95% copper, 5% zinc). Even with the change to a cheaper composition, it costs the US Mint 2.41 cents to make each penny. The Mint’s loss in profitability from making pennies in 2011 was over $60 million. There has never been a coin as worthless as the penny. One cent in 1933 is the same as 18 cents in 2012. Most vending machines and toll booths do not accept pennies. The zinc pennies made today are also toxic. If swallowed, the copper-plated coin will erode into a sharp edge, and pets and small children can die from zinc poisoning. If you survive zinc poisoning, you may suffer severe liver or kidney damage.  (Report:  http://radiology.rsna.org/content/213/1/113.full)  To top it off, each penny made before 1982 has approximately 2.54 cents worth of metal. You would be making a sizable profit if you melted them.

Quite frankly, few people even use pennies. Canada’s Jim Flaherty noted, “The real issue was that people weren’t using them, they were putting them in jars at home, and we were doing the same thing at my house.” However, I absolutely recommend against melting your pennies because destroying legal tender in the US is a federal crime punishable with a $10,000 fine and/or five years in prison. There are better ways to deal with the issue.

One strategy is called take a penny, leave a penny. Most gas stations and convenience stores across the country should have a tray or dish with pennies. If you receive pennies in change and you do not want them, simply place them in the tray so other customers can use them in their own transactions. If future customers are short by a couple cents, they can take the pennies they need from the tray so they can avoid having to get change for a nickel. (Nickels, by the way, currently have about 5.1 cents worth of metal, and it costs over 9 cents for the Mint to make each one. Its spending power is minuscule as well, so consider leaving them in the tray, too.) Donating your pennies to charity or processing them in a Coinstar machine to get larger denominations of money are also suggested strategies to get rid of your pennies.

After you’ve gotten rid of your pennies, tell your local representative. Two previous bills were proposed in 2002 and 2006 to eliminate the penny, but the Senate denied both. Another proposed bill in 2008 to make pennies out of steel instead of zinc also died in the Senate. The idea of halting penny production isn’t something new. It’s been around for a decade now, but the US Congress is notorious for being slow and out of touch. Tell your local congressman or congresswoman you don’t think a $60 million loss is worth it! You don’t think it’s fair that a pre-1983 penny is really worth 2.5 cents. Also remind him/her about Congress’ record-low approval rating of nine percent. Get rid of your pennies, and get more accustomed to using paper and plastic for your transactions.