How Losing The Penny Changes The Economy

As the US officially phases out the penny, both retailers and consumers will need to prepare for purchasing and pricing changes that will create ripple effects across the economy.

The Little Picture: President Donald Trump ordered the Treasury Department to stop producing pennies in February, resulting in the US Mint making its final purchase of blank copper penny templates this month. That gives the Mint enough blanks to make pennies until the beginning of next year… and only about eight months for people to prepare.

Behind the Coins: Some big changes are about to happen from the US dropping its smallest currency.

• Expect price rounding and how change is given to shift radically — gone will be the classic $9.99 price points to subliminally make things appear cheaper than they are.
• The Treasury has already issued guidance that businesses will need to round up or down five cents — a move that could shift sales projections and taxes.
• But since cashless transactions will still be priced as “normal,” some companies may simply stop accepting cash (the third most-used form of payment).
• That could burden low-income and older Americans — those over 55 use cash for 22% of purchases, compared to 12% of those under 55.

Checkout: The US is actually late to the getting-rid-of-the-penny bandwagon — Canada ditched theirs in 2012, and Australia and New Zealand did so decades ago. That’s because producing such a low-denomination coin takes more money than it’s worth. It currently costs 3.69 cents to make something worth only a cent (especially when most end up in piggy banks instead of circulating in the economy). That math doesn’t add up — penny production led to a loss of $85.3 million last year. Woof.

So, what will we be throwing in wishing wells next year? Nickels are the next coin up… but even those cost 14.68 cents to make. So, maybe quarters. But in this economy, that feels like a stretch.

Prediction: The concept of the 99-cent store is likely a thing of the past.