Cost of Production

All pennies were created equal. Each has a set value of one cent, one-hundredth of a dollar. But what if their equality is not the issue, but rather their creation in the first place? As of the Spring of 2006, the Penny cost 1.4 cents to produce.1 That means that the U.S. Government is losing money every time it creates a new penny.

The problem is in the metals used to make the Penny. Although traditionally recognized as a copper coin, since 1982, the Penny has be constituted almost entirely of zinc, with only a thin coat of copper. Zinc used to be cheap, but now it has gained in popularity, causing it to triple in value since 2003.

The early days of cheap penny manufacturing
This famous image shows two enterprising young men working at the U.S. Mint.  Since laws were enacted that prohibit cheap laborers like these from working, the price of penny manufacturing has increased significantly.

Despite the rising costs, the mint is making huge amounts of these expensive pennies, upwards of 7.7 billion per year. Why is the mint having to try so hard to keep up with demand for the Penny? Perhaps it is because the metals inside the Penny are more valuable than the Penny itself. Forward-thinking criminals are catching on that they may soon be able to melt down pennies and sell of their constituent metals for a profit. The fact that so many are having to be replaced in circulation could be evidence of hoarding of useless pennies.

1Information in this section provided by this article from the NYT: Norris, F. (2006). A Penny for Your Thoughts, and 1.4 Cents for the Penny. The New York Times.