Earlier this year, the Trump administration ordered the U.S. Mint to stop producing pennies, citing the rising cost of penny production compared to its value. The Treasury Department confirmed that once their current production round was complete, they would cease making the coin.
While the cost of producing a penny is now almost 4 cents per coin, that hasn’t always been the case, and stopping production may have unexpected side effects. Here’s what to know about the penny.
The cost of a pretty penny
The penny was one of the very first coins issued by the U.S. Mint when it was established in 1792. The original penny design featured a woman with flowing hair to symbolize liberty, as Congress “believed that putting the current president on a coin was too similar to Great Britain’s practice of featuring their monarchs” and chose to “personify the concept of liberty rather than a real person.” On March 1, 1793, 11,178 copper pennies were put into circulation.
However, it wasn’t long before the rising cost of copper led to changes in the composition of the coin. The most recent change in composition was in 1982, when pennies began being produced primarily with zinc. These changes helped keep the cost of production below the face value of the coin, at least until 2006, when zinc prices rose. The Mint began producing pennies at a loss that steadily became larger over the years, reaching its peak last year at 3.7 cents per penny. Last year, the U.S. Mint reported that it lost $85 million minting 3,172 million pennies.
While the Treasury expects to immediately save $56 million in reduced material costs by stopping penny production, the penny isn’t the only coin currently being produced at a loss.
Penny-pinching
The nickel, which is mostly made from copper today, costs 13.8 cents per unit to produce, meaning the government lost 8.8 cents for every nickel minted last year. The amount of coins produced each year fluctuates based on orders from the Federal Reserve, which estimates how much of each coin the country will need. So, while the government lost only $17.7 million in 2024, producing 202 million nickels, the year before, they produced significantly more nickels at a loss of $92.6 million. Some experts have noted that getting rid of the penny could cause an increase in demand for nickels, which would not save the government money on coin production.
Thankfully, dimes and quarters are still producing enough profits for the U.S. Mint to make up for the penny and nickel losses (dimes cost 5.8 cents and quarters cost 14.7 cents) and are expected to continue doing so for many more years. In the meantime, it will take an act of Congress to stop the production of the penny permanently. Two bills have been introduced this session, but past attempts to eliminate the penny have been unsuccessful.
Leaving us penny-less?
Despite the U.S. Mint stopping penny production, the penny is, and will continue to be, legal tender in the United States for the foreseeable future. There are currently plenty of pennies in circulation, approximately 114 billion, many of which are sitting in jars on shelves, vastly underutilized. Therefore, stopping production won’t have an immediate impact on consumers and retailers. But eventually, phasing out the penny may impact retailers’ pricing strategies and cash transactions.
To start, cash transactions will have to be rounded to the nearest nickel, but in which direction will be up to the retailer unless Congress includes a directive in any proposed penny-eliminating legislation. Without a consumer-friendly rounding requirement, it has the potential to unfairly impact low-income and older Americans who are more likely to use cash.
It is possible that the 99-cent pricing strategy will become a thing of the past, a 95-cent pricing strategy will become more common, or retailers will come up with a whole pricing strategy. The impact might also turn out to be marginal in our increasingly cashless world, where only 16% of payments are currently made in cash.
If the United States does eliminate the penny for good, journalists can look toward several other countries that have successfully eliminated their lowest-denomination coins as examples, including Canada, which stopped producing its penny in 2012.
Word of the day
Seigniorage: the difference between the face value of money and what it costs to produce it.
