How Much Do Cents Cost & Why It’s More Than Face Value

The U.S. penny, representing one-hundredth of a dollar, has been a part of American currency for centuries, serving as the lowest face-value physical unit since the abolition of the half-cent in 1857, and has remained a constant in daily transactions. However, its true cost extends far beyond face value, encompassing manufacturing expenses, economic inefficiencies, and broader financial implications. Understanding these various costs provides insight into the ongoing discussion surrounding its continued circulation.

The Cost of Manufacturing Cents

The United States Mint consistently incurs a cost to produce each penny that exceeds its one-cent face value. In Fiscal Year 2024, the U.S. Mint’s cost to make and distribute a single Lincoln cent was approximately 3.69 cents. This figure represents an increase from previous years, with the cost standing at 3.07 cents in Fiscal Year 2023 and 2.72 cents in Fiscal Year 2022. The penny has cost more to produce than its face value for 19 consecutive years.

This situation illustrates what is known as negative seigniorage, which occurs when the cost of producing currency is greater than its face value. Seigniorage refers to the profit a government earns from creating money, calculated as the difference between the currency’s face value and its production cost. For instance, the U.S. Mint reported losing approximately $85.3 million in 2024 from penny production.

Factors Influencing Production Cost

The primary factor driving the cost of manufacturing a penny is its material composition. Pennies minted since 1982 consist of 97.5% zinc with a thin plating of 2.5% copper, a significant change from earlier compositions that were predominantly copper. Fluctuations in the market prices of these raw materials directly impact the overall production cost per coin. For example, increased prices for zinc and copper contribute substantially to the rising expense of minting pennies.

Beyond raw materials, other operational factors contribute to the total cost:
Labor expenses, including the wages for skilled personnel involved in the minting process.
Energy consumption, covering utilities such as electricity, gas, and water used in the minting facilities.
Transportation costs associated with distributing the newly minted coins to Federal Reserve Banks.
Administrative overhead, encompassing building maintenance, janitorial services, and production supplies.

Economic Considerations of Penny Circulation

The “cost” of pennies extends beyond their manufacturing to encompass broader economic implications once they enter circulation. Businesses incur indirect costs related to handling, counting, and transporting these low-value coins, which can consume valuable time and resources. The need for specialized equipment, such as cash registers and coin sorters, also adds to operational expenses for many enterprises. The cumulative time spent by consumers and businesses during transactions involving pennies, often waiting for exact change, represents a hidden “time cost” that impacts productivity.

Furthermore, a significant number of pennies are effectively removed from active circulation by being hoarded in jars, piggy banks, or forgotten in various places. This phenomenon, where pennies are not actively used in transactions, means the U.S. Mint must produce a greater volume of new coins to meet demand, exacerbating the negative seigniorage. An estimated 114 billion pennies are currently hoarded. Older pennies, particularly those minted before 1982 with higher copper content, are often hoarded for their melt value, despite federal prohibitions on melting U.S. coinage.

Arguments for Penny Discontinuation

A primary argument for discontinuing the penny stems directly from the financial losses incurred by the government due to negative seigniorage. Eliminating the production of this coin would directly save taxpayer money, redirecting resources that are currently spent on creating currency that immediately loses value.

Another compelling economic argument revolves around the operational inefficiencies faced by businesses. The time and resources spent handling, counting, and transporting low-value pennies create a burden that outweighs their utility in transactions. The minimal purchasing power of the penny, significantly eroded by inflation over time, renders it less useful for everyday transactions. For example, a penny from 1913 had the purchasing power equivalent to 32 cents today.

Proponents of discontinuation suggest transitioning to rounding cash transactions to the nearest nickel. This practice, already adopted by other countries, would eliminate the need for pennies in physical exchanges. Studies indicate that such rounding would not impose a “rounding tax” on consumers, as prices would round up and down with relative balance over time. Electronic transactions, which constitute a growing share of purchases, would remain unaffected by such a change, continuing to be processed to the exact cent.