The debate about phasing out hard currency in favour of digital alternatives could be set to intensify with news that the US Mint is facing a shortage of coins due to the pandemic.
Widespread lockdowns and health guidelines favouring the use of credit and debit payments over physical cash has hit the supply of coins and led the Federal Reserve to convene a US Coin Task Force to cope with the shortage
It has also reignited discussions about scrapping pennies altogether given that they cost more to make than they are worth.
The US is behind other countries which have looked to either eliminate or reduce the use of coins. Britain, Australia and Canada have all halted production of their smaller denominated coins while India made a more dramatic move to digital cash when it took high value notes out of circulation in 2016.
Cash payments did resurface in India, however digital payments have reportedly soared again during the pandemic and the same could yet happen in the US.
Not only has the purchasing power of coins fallen in recent years, the production costs have also risen. A 2019 report from the US Mint showed that each penny costs 2 cents to produce and they account for 59% of the total number of coins produced. In fiscal year 2019, the Mint manufactured more than seven billion pennies at a loss of nearly $70m.
There is opposition to a planned penny purge, including advocacy group Americans for Common Cents which has stressed the antimicrobial qualities of copper-based coins as a pertinent property during the pandemic as well as arguing that consumers could lose out if prices ending in 99 cents are rounded up.
This argument has been countered by a US academic, Robert Maples, an economics professor at Wake Forest University, who told the New York Times that prices are rounded down as much as up and consumers generally break even.
Maples also said that the current coin shortage would be a "good opportunity to seize the issue".
However, other academics while in favour of scrapping pennies also recognise that with the threat of the biggest economic recession in decades on the horizon, there may be other priorities for lawmakers. As Harvard economics professor N. Gregory Mankiw, told the New York Times: “Of all the issues we face, this is probably not a front burner one at this moment.”