AYESHA RASCOE, HOST:
Penny-pinchers are turning into nickel-pinchers. President Trump ordered the Treasury in February to stop minting new pennies. And for many businesses that deal with cash, that has meant trouble at the register. Making exact change is not always possible. Round up and risk angry customers. Round down and take a loss. Robert Whaples is a professor of economics at Wake Forest University and joins us now. Thank you for being with us.
ROBERT WHAPLES: Well, thank you for inviting me on.
RASCOE: You've been a longtime advocate for getting rid of the penny, but you don't hate pennies. I want to clarify that (laughter). Well, why get rid of the penny?
WHAPLES: I published an article actually 18 years ago, saying that it was time to get rid of the penny, to stop minting them. The basic reason is that there's not really a rounding tax, it turns out. If you look at actual cash register totals, they don't always end in nines and therefore would get rounded up to the next nickel or dime. They're kind of totally random. So when you get rid of the pennies and you're still doing a cash transaction, you will round now to the nearest nickel, and it pretty much breaks even. And so since we've been losing a lot of money making these pennies, and we're wasting our time - and our time is valuable - that's why I thought it's time to get rid of the penny.
RASCOE: It's coming to fruition. But are you surprised that we're talking about penny shortages this early? Because the U.S. Treasury estimated there wouldn't be shortages until next year. But according to the National Retail Federation, retailers, banks and other businesses that rely on pennies have reported shortages in markets across the country.
WHAPLES: I am a little bit surprised that it's going this fast. In fact, I kind of envisioned it taking years or decades to kind of totally unfold. But I guess the key is this - banks don't give you a free ride on the pennies. And so it costs them money to deal with the pennies and package the pennies and doing all that stuff. So they're charging retailers more than 50 cents for a roll of 50 pennies. That's why the retailers now don't want to mess around with it.
RASCOE: OK. What should businesses do if they don't have the pennies and they can't make exact change? Some businesses are saying if they round down, they're going to have losses.
WHAPLES: First of all, it's only on cash transactions, and the vast, vast majority of our transactions are not cash anymore. But for those cash ones, the first thing that the retailer can do is hang up a little sign saying, hey, we've run out of pennies. Can you guys bring them in? And if they do, problem solved. And so then what's going to have to happen is people are just going to get used to rounding the cash amount, and they'll feel hurt sometimes. Dang it, I lost 2 cents. But if they pay attention and they're an average person, it'll break even over time.
RASCOE: For the businesses themselves, you don't think that they'll have significant losses because of the lack of the penny? You think that they'll be able to work that out?
WHAPLES: I don't think so. So the paper that I published 18 long years ago, I got some convenience store data. It was, like, about 180,000 observations of cash register totals, and this was for the Wilco chain, which is headquartered here in Winston-Salem. And there were, like, 20 stores up and down the East Coast, and I just - I looked at them all, and I looked at the last digit, and how would the rounding break? And I found that, in fact, if you rounded it, the customer wins ever so slightly - something like a 40th of a cent on average when there's rounding. That's what I found in my data set. I would suspect that's not a heck of a lot different than zero. And so the customer or the business, once in a while, they come out 2 cents ahead or 1 cent ahead, once in a while, 2 cents ahead or 2 cents behind. But it all really is about to break even in the long run. That's the way I see it.
RASCOE: Looking at the nickel, it cost about 14 cents to produce. Should we ditch that one, too?
WHAPLES: Well, you know, the dominoes are falling, and so the nickel's turn will be next. I don't know when that will be. I don't really take a stand on whether or not we should get rid of the nickel at this point. But, you know, the last time we got rid of a coin was the halfpenny, and that was all the way back in 1857. So that's 170 whatever years before we got rid of the penny after that. So I don't know if it's going to take that long to get rid of the nickel, but I wouldn't be surprised if it takes quite a while just 'cause of the inertia that we see in the American political system.
RASCOE: That's Robert Whaples, professor of economics at Wake Forest University. Thank you so much for being with us.
WHAPLES: It was my pleasure. Thank you. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
