The Canadian senate has been conducting a study since 2008 on the utility of the penny in the Canadian economy, which was presented last night. The penny is being targeted for removal after citing it’s significant as legal tender has diminished over the last sixty years.

For example, the cost to manufacture one penny actually cost around 1.5 cents and balloons to 4 cents when the government factors in shipping and handling to get it from production to costumer hands. So for the government to keep the supply of 30 billion Canadian pennies in circulation, it cost tax payers an estimated 130 million dollars, PER YEAR!

Seigniorage, is referred to difference between the sum of the cost and the face value of the coin and is getting larger with each passing year courtesy to inflation and higher labour and metal prices, while the value of the penny is stuck at 1 cent. The results are a piece of legal tender that cost more than it is worth. Adjusted for inflation, using the earliest records on the penny available, one penny in 1870 (it was introduced in 1858) was worth about 27 cents in 2005.

Another interesting argument against the penny is that only 37% of Canadians (yes I am one of them) actually use the penny. The rest of Canadians place their in saving dishes, fountains or miss place them because they do not find them valuable. Over half of one survey respondents reported that they view the penny as an inconvenience and view it as useless.

Another supporter to abolish the penny heard on CBC this morning, calculated the costs of the penny, time spent waiting for change to be counted and employee productivity levels from handling the penny at several million dollars a year.

Well all these people out there hate the penny, I am one who likes it and was interested by the extra money that it would cost me over my life time if the penny was abolished on cash transactions. Luckily for me, someone else had already wondered the same question and completed some analysis for me to share. Here are the Desjardin Groups findings

Desjardin findings suggest that 816 million pennies are produced annually, just to replace the amount of penny that consumers take out of circulation, some of which are literally thrown in the garbage. If we removed the penny from circulation, like some countries have already done, we would be saving millions of dollars in taxes per year.

Since all decimal points will exist on debit and credit card payments, a method called Swedish rounding will apply to cash transactions. Swedish round is symmetrical meaning that neither sellers nor buyers would profit over time from rounding. Over time, the method would balance out the gains and losses from rounding to the nearest decimal point.

Swedish rounding

If the senate does determine the penny isn’t worth keeping, there will be 12 months notice until the penny is not longer accepted as legal tender.

Bookmark It

Hide Sites