Via Freakonomics comes the news that Canada is giving up its penny. And no wonder. According to the Canadian government’s factsheet:
- It costs the Government 1.6 cents to produce each new penny. The estimated cost to the Government of supplying pennies to the economy is about $11 million a year.
- Due to inflation, the penny’s purchasing power has eroded over the years. Today it retains only about one-twentieth of its original purchasing power. Given its declining purchasing value, some Canadians consider the penny more of a nuisance than a useful coin.
The materials cost is the most obvious reason for dropping the penny, except that it’s been worse in other places. The value of the materials in the South Korean ten won coin had, by 2006, risen to 38 won; but the government responded by designing a new coin, which looked identical but was made from copper-coated aluminium rather than brass.
The more important point is actually the second. The average Canadian hourly wage is $23.63, so the average wage per minute is around 40¢, which means that if fishing out and handing over a penny in change takes more than one and a half seconds, it isn’t worth it. Unless Canada has the best damn sales assistants in the northern hemisphere, they aren’t doing it that fast.
(For comparison, Britain’s average hourly wage is £14.54, giving the cashier a whole 2.5 seconds to deal with a penny change. Leisurely.)
It’s not just the amount of wasted time, either. Pennies have storage costs, transport costs, and, by imposing increased transaction costs, they prevent mutually beneficial trades from taking place. A study cited by the Canadian treasury puts those costs at $150 million a year, including well as the $11 million loss due to the cost of the bronze. Since only $130 million worth of pennies are even minted each year, that’s a substantial loss.