What Does It Cost to Make One Penny?

The United States penny, one-hundredth of a dollar, is a familiar coin. Many are curious about the actual cost of producing this small denomination. This often stems from an understanding that raw materials and manufacturing might exceed its minimal face value. Examining the financial realities behind the penny’s creation offers insight into the complex economics of currency production.

The Current Production Expense

In 2024, the U.S. Mint reported it cost 3.69 cents to produce and distribute a single Lincoln cent. This figure significantly surpasses the penny’s one-cent face value. This disparity means the government incurs a loss on each coin. The unit cost of producing pennies has remained above their face value for 19 consecutive fiscal years as of 2024.

Components of Production Expense

The cost of minting a penny includes several elements:

• Raw materials: The U.S. penny is 97.5% zinc with a 2.5% copper plating. Fluctuations in global commodity markets directly impact these expenses.
• Labor costs: Personnel involved in the minting process contribute to the total.
• Operational overhead: This includes machinery maintenance, energy consumption within facilities, and security measures.
• Administrative expenses: Costs associated with managing coin production are factored in.
• Transportation and distribution: Moving finished coins from mints to Federal Reserve Banks adds to the unit cost.

Historical Cost Trends

The penny costing more than its face value is not a recent development. The U.S. Mint has adjusted the penny’s metallic composition several times, often in response to rising metal prices and to manage production costs. For instance, the penny was pure copper from 1793 to 1837, then shifted to bronze and later to a copper-nickel alloy.

A significant change occurred in 1943, when pennies were temporarily made of zinc-coated steel due to copper shortages during World War II. From 1962 to 1982, the composition was 95% copper and 5% zinc. Since 1982, the penny has primarily consisted of a zinc core plated with copper, a change implemented because the value of copper in the coin began to exceed its one-cent value.

Economic Considerations

When the cost to produce a coin exceeds its face value, the government experiences what is known as negative seigniorage. Seigniorage is the profit a government makes from issuing currency, representing the difference between its face value and production cost. For the penny, this difference is negative, resulting in a financial deficit for the U.S. Treasury. This means a direct loss is incurred for every penny minted and put into circulation.

The U.S. Mint reported a loss of $179 million in 2023 specifically from penny production. This significant financial outflow highlights the ongoing economic burden associated with maintaining the current production of the one-cent coin. This situation raises questions about the long-term viability of the penny’s continued existence.