will we have no more 'penny for your thoughts'

Time to ditch the penny?
TheTorontoStar Feb 16, 2007

We toss them in the garbage, lose them in couches, hoard them in jars, waste them in fountains, and leave them behind at the cash register.

Canadian consumers would be better off if we just got rid of the penny, concludes a report released yesterday by the Desjardins Group, one of the biggest financial institutions in Canada.

Canada issued 30.5 billion pennies between 1908 and 2005. Even assuming a third of them have now disappeared, there are still 600 per Canadian in circulation – and that's costing the country at least $130 million per year or $4 a person, the report said.

It's not the first time the federal government has been called upon to ditch the one-cent coin.

"I think any sensible benefit-cost analysis on the penny would conclude that it should no longer be used," said Don Drummond, chief economist of TD Bank Financial Group, yesterday.

"Witness the number of people who just walk away from the cash register when pennies are due back, or the number of cash registers where there is a bowl in front to take or leave a penny, or how often the person at the register rounds the change up to the nearest nickel. These are all signs that the costs exceed the benefits."

One of the arguments for keeping the penny circulating is that prices could go up without it. But many experts say that's not true.

The total on cash transactions would be rounded to the nearest five cents. So, a bill that now comes to $9.98 or $9.99 would cost $10, but so would those that are now $10.01 or $10.02.

"There is competition in the marketplace," Drummond said. "If (stores) could all bump up their price a few pennies, they would have already done it."

Only 40 per cent of Ontarians still use pennies for purchases, according to a survey by Desjardins. Women tend to use their change when shopping more than men do, as do those aged 66 and over.

Figures show that consumers hoard pennies or throw them away rather than putting them back into distribution, the Desjardins report said.

Last year, the United States Mint revealed that it will cost about 1.4 cents (U.S.) this year to make its one-cent coin. In Canada, the cost of producing a penny is "less than one cent," said Royal Canadian Mint spokeswoman Christine Aquino.

The $130 million cost of keeping pennies in circulation includes production, storage and the cost of simply dealing with them – $20 million for banks and other financial institutions and about $60 million for retailers, Desjardins said. Both those sectors pass the costs on to consumers, it said.

There are other costs too, such as the environmental impact of processing the metal, manufacturing the alloys, and transporting the pennies, Desjardins said.

Although the majority of opinions posted on thestar.com yesterday supported banishing the penny, one from Safi Habib of Bramalea made a poignant plea: "I love the true symbol of Canada, the maple leaves ... If we do away with the penny, then at least get that maple leaf on another coin."

Australia and New Zealand are among the countries that have already abandoned pennies. Although U.S. Republican Congressman Jim Kolbe tabled a bill last summer to phase out the penny, Desjardins said it will likely take the Americans a few more years to do that.

"The majority of them want to keep it," the report said. But there's no need for Canada to follow the U.S., which is "very conservative, particularly with its symbols," Desjardins said.

Canada's finance department periodically reviews the status of the penny, as it does all of the coins produced by the mint.

So far, those reviews have concluded that the elimination of the penny is not warranted. The finance department has not directly consulted retailers or the public on the issue.

The decision to get rid of the penny rests with the minister of finance. It would be easier for Jim Flaherty to make the move if the Bank of Canada would publish research on the issue, and publicly state that removing the penny would have no effect on inflation, Desjardins said.

The Bank of Canada said yesterday that, because the decision rests with Flaherty, it "does not have an official position and has not published any papers on this issue."

Dan Miles, a spokesman for Flaherty, said "we'd like to review the report and see what it has to say before we make any comment."