With the recent decision to eliminate the U.S. penny, policymakers and pundits alike have rushed to assure the public that the change will be benign—an overdue modernization that saves the government money without disrupting everyday life. But this sunny outlook overlooks a real risk: inflation, driven not by economic fundamentals but by behavioral economics and the pricing habits of businesses.
Let’s be clear: cash transactions won’t disappear with the penny. They’ll be rounded—to the nearest five cents. And while government guidelines suggest rounding should average out, human nature and market pressures don’t follow tidy rules. If retailers consistently round prices up rather than down, even small adjustments can accumulate into a meaningful inflationary effect, especially for low-income Americans who rely more on cash.
The Rounding Trap
Most Americans don’t feel the impact of pennies day to day. They swipe a card, scan a phone, or tap a watch. But nearly 14 million U.S. adults are unbanked, and millions more rely on cash for budgeting. For these Americans, a few extra cents on each purchase quickly add up. If a gallon of milk priced at $2.98 suddenly becomes $3.00 at checkout, and if every corner store and gas station adopts similar rounding practices, the cost of daily living subtly increases.
Canada’s experience is often cited as a success story, but it’s not without caveats. While there’s no evidence of runaway inflation, studies show that businesses tended to round up more than down. In aggregate, this might be small, but it’s not zero—and over time, it’s a tax on the consumer.
A Call to Responsibility
This is where American businesses must step in—not with a marketing gimmick, but with a moral stance. If the penny disappears from circulation, companies should publicly commit to rounding cash transactions down, not up.
It’s a small gesture, but one that signals respect for the consumer and an understanding of the inflationary pressures already burdening working-class families. Rounding down won’t break a business, but rounding up en masse could nickel-and-dime the economy into higher baseline prices.
The Bigger Picture
Critics of the penny have rightly pointed out its outdated nature and the wasteful cost of production—over $250 million in taxpayer losses over the last two years alone. But eliminating a coin should not mean eliminating a safeguard for the consumer. If we remove the penny without careful planning and ethical pricing practices, we risk turning a smart fiscal decision into a regressive economic one.
We’ve made the decision to scrap the penny. Now, we must make the right choice about what replaces it: fairness or silent inflation.
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