Canada Eliminates the Penny (By: Grigorji Webster)
Although the penny has been in circulation in Canada since 1876, it has now reached its final stages. As of May of 2012, the penny stopped being manufactured, although it remained in circulation and is obviously still very common.
As early as this fall, however, the Canadian government will be asking businesses to give their pennies back to the government, significantly cutting down the availability of pennies. The government will then melt the pennies and their metal content will be recycled.
The main reason for stopping the manufacturing of the penny is simple – it costs the government more to make it than it is worth. The cost to make one penny is 1.6 cents. Since the penny itself is only worth one cent, it costs the government 0.6 cents more to make it than it is worth.
It is also interesting that since 2000, the penny has been made primarily of steel, not copper as most people tend to think.
With the elimination of the penny, many people wonder what will happen if something costs an amount not ending in a zero or a five. The government advises that in such cases a simple rounding technique will be used: the last digit will be rounded down to zero if the price ends in one or two, or to five if ending in a six or seven. The price will be rounded up to a five (for three and four) or the next ten value (for eight or nine).
The elimination of the penny does not affect non-cash sales such as cheques, debit cards, and credit cards.
There are other reasons for eliminating the penny. Due to inflation, one cent is becoming worth relatively less and less, making the penny monetarily insignificant anyway. As well, in a time when government debt is at the forefront of everyone’s mind, the expensive production of the penny is just no longer justifiable.
The penny’s elimination is a win-win situation for government. Time will tell if the penny’s demise will make the lives of Canadians easier.