Here's something to think about the next time you see a filthy Abe Lincoln on the sidewalk.
What if the very act of picking up a penny is more financially valuable than the one cent gained? In other words, is the value of a penny so minimal while the direct value of our time so great that it makes more sense to leave the penny alone?
For many of today’s freelancers and members of the gig economy, the answer is YES--spending a few seconds to pick up a penny would be a financially unwise decision. More potential pennies would fall out of one’s proverbial pocket than be placed in one’s actual pocket. The penny is so nominal in value that just a few seconds of time commitment spent picking one up would be financially unsound.
Let’s break it down:
How many seconds is too much of a time commitment to make picking up a penny worthwhile? Use your per hour income as a freelancer to see what your break-even point is. For example, a freelancer receiving $18/hour has a break-even point of 2 seconds.
Picking up a penny every second for an entire hour would give you a grand total of $36.
So for a freelancer or anyone else able to command over $12/hour with their “free time,” three seconds used to bend down and pick up a penny is a losing proposition. A freelancer making the current minimum wage ($7.25) would find their time better spent leaving the change on the ground if the act would take five or more seconds.
This isn’t just an idle thought.
According to a recent study the McKinsey Global Institute, almost a third of American workers now participate in the gig economy. Whether it is done on a full-time basis or more an act of supplementing income, the rise of the gig economy makes the value of “spare time” highly relevant. For many participants in the gig economy, retrieving a penny would be negligible at best and negative at worst.
We have a problem, of course. The dilemma is created by a rise in the direct value of our time within the gig economy, combined with the continuing devaluation of the penny. Applying any free time to generate money is becoming more achievable through on-demand platforms and freelancing sites, while the relative value of the penny decreases with inflation. The average Uber driver, for example, was making $19/hour in the top 20 US markets according to a 2015 study. For that average Uber driver, two seconds picking up a penny outside of their car would be less valuable than two more seconds driving.
Why pick up a penny when you can pick up your phone? The ease of generating income in the gig economy may be making orphan pennies a mere nuisance.
Are you losing money by picking up money? Use your average per hour income as a freelancer, along with the time used to pick up a penny, to find out! Being in the blue is a gain, while being in the white is a negative.
Perhaps the penny is destined to stay on the ground and in circulation. The one-cent has been a part of our currency through private mints since the late 18th century, and made legal tender with the Coinage Act of 1864. The US half-penny was eliminated in 1857. Despite some passionate advocacy for the United States to eliminate the one-cent piece, the penny shows little sign of death. But whether the lowest denomination of currency has been reduced to wasting our time is another story.
There are some who find picking up a penny good luck. Others insist that the one-cent pieces add up, and can send you over some great stories like the Louisiana man who collected pennies for 40 years and cashed them in last year for $5,000. But for those in the gig economy making a decent wage, that may be penny wise and pound foolish.
Persistent as the penny is, there's no doubt its days are numbered – like all our bills and coins. To find out about where money is headed, we talked to Kabir Sehgal.
Find a penny, pick it up, all year long, you'll have that f*cking penny. There is a mounting consensus that the US should retire its tiniest coin.
According to the US Mint, the cost of making a penny in 2015 was 1.4 cents. These cents add up to millions of wasted dollars every year, and in 2015 alone, its production cost taxpayers $39 million. Meanwhile, even my local vending machines won’t accept them for the cent that they’re supposedly worth. Given how hard it is to spend a penny and that the raw materials are worth more intrinsically than pennies themselves, it’s hard to see why the government bothers to continue making them. As Binyamin Appelbaum points out in The New York Times, if the purpose of currency is to facilitate commerce, the penny is clearly failing.
An America without pennies is actually not hard to imagine. All prices and transactions would be in increments of $0.05. And while we’re at it, we may well consider rounding everything to tenths of a dollar (i.e., making dimes the new pennies) because, at 7.4 cents a pop, nickels aren’t cost-effective either. More concretely, America would not be the first country to abolish the penny. Canada, where coins are similarly costly to produce, stopped manufacturing and started recycling pennies a few years ago.
Nevertheless, some remain steadfast in their endorsement of the cent. But if citizens can barely use pennies and the government is spending millions to make them, then who is left to take a protectionist stance against the copper-coated coin? Nostalgia-laden penny-lovers aside, one staunch defender of token is Brian Domitrovic, a contributor of Forbes who wrote a daring defense of the dollar’s hundredth. He argues that in an economy running on faith in fiat currency, the pennies and nickels are the closest things America has to its banking system having a firm foundation. Historically, he observes, such a system is what Americans have preferred. He writes:
The gold piece was $20, because that was the smallest you could get a stamped disk of gold worth a reasonable amount and still see it. Silver traded about 1/20th of gold on the markets, so a similarly sized piece in silver became the dollar. Nickel was worth less than silver as much as silver was worth less than gold, so it came in for the 5-cent piece. Copper traded at a fifth of nickel, so it got tabbed for the penny.
Note the relationship between the monetary unit and the metallic constituent of the unit. The monetary unit was worth just a little more than the underlying metal. If you boiled a gold dollar into liquid (an old French word for boiling was bouillion), you would get a shade less than $20 in gold, and the same thing in turn for all the other units. Bullion was cumbersome as a means of exchange, but reliably stamped common units of bullion were not.
While the historical narrative is insightful, it’s hard to imagine pennies as anything but cumbersome, especially when cashiers and impatient customers nationwide roll their eyes when a surprisingly patient person proceeds to use them. Furthermore, looking more into American monetary history, we find that the half-cent coin was abolished when it was valued at a whole eight cents of today’s currency.
Domitrovic’s defense of the penny is more than merely a historical argument, however. He adds that it is our last remaining means for keeping the banking system accountable. Reflecting on our present economic climate, he writes:
The Federal Reserve has bought out bond-holders to the tune of $40 billion a month for the long term, stacked up “excess reserves” in the accounts of its numerous money-center member banks, lowered interest rates to the zero-bound, and blown off standard market measures of the judiciousness of its easing (as in the 400%-600% run-up in gold this millennium).
All that, again, for the worst recovery since the Great Depression, if not ever.
Thus what we have with the penny and the nickel is the last, residual restraint that the government actually faces when it manufactures money. This money, this petty change, actually costs something to make. Which would be precisely why we should insist that the United States keep making it.
His historic narrative of the penny is compelling, but it might be a stretch to imagine that pennies and nickels are sufficient to constrain the modern banking system from running astray with inflation in the face of the Federal Reserves monthly allowance of $40 billion to bond-holders.
In the face of all this penny-madness, the concise prescription of Harvard economist Greg Mankiw provides sober insight:
[The] New York Times reports: “it costs the mint well more than a cent to make a penny.” The solution, in my view, is to get rid of the penny.