Canada’s decision to cease distributing pennies on February 5 doesn’t portend the end of the cent in America. There are several reasons why the US won’t follow Canada’s example any time soon according to Mark Weller, Executive Director of Americans for Common Cents.
Weller cited three reasons why Canada’s decision to stop producing the penny is different from the penny in the US.
First, the Canadian Finance Minister acted to stop penny production by executive fiat. Such an action made unilaterally in the U.S. without Congressional direction would likely meet widespread opposition, Weller said.
Also, unlike Canada, there is still widespread support for the penny in the US. Over two-thirds of the public want to keep the penny according to a March 2012 Opinion Research Corporation poll commissioned by ACC.
Apart from process differences and public support, the financial impact from estimated savings in Canada is different than in the US. Canada has estimated savings of $11 million per year through penny elimination. In contrast, Navigant Consulting has found that elimination of the US penny would actually cost $10.9 million. Their February 2012 study noted that Mint fabrication and distribution costs include fixed components that will continue to be incurred if the Mint eliminates the penny. Also, under current Mint accounting, the nickel costs eleven cents to manufacture. “It’s hard to see how you save money by making more nickels that are losing more money,” Weller added.
Canada originally planned to end penny production in the fall of 2012 but delayed the decision due to protests from businesses. Retailers did not want to implement a confusing scheme of rounding transactions to the nickel over the holiday shopping season. Americans are concerned about rounding as well. Weller said, “the public hates the idea of rounding to the nickel, which is the alternative to the penny.” Over 77 percent think merchants will raise prices to compensate for loses due to rounding according to a Gallup survey.