In 1859, the year before Abraham Lincoln was elected president, the U.S. mint introduced a new design for the penny. The handsome design was produced by James B. Longacre, the chief engraver for the U.S. mint. It appears to show an American Indian in ceremonial costume, although it is reported that the model was in fact Longacre’s own daughter, Sarah, who wore a borrowed headdress for the sitting.

At that time, the typical laborer’s wage was 10 cents an hour. A penny would buy half a pound of corn meal and six cents would buy a pound of corned beef, so a worker’s family could live on such a wage.

Just two years earlier, the mint had stopped issuing half-pennies, which had been in circulation since the founding of the republic, because they were too small a denomination to be worth bothering with.

Today, the average wage of an American nonsupervisory worker is $24 an hour, 240 times more than in Lincoln’s day, and a penny will buy just a quarter of an ounce of corn meal. Yet we still have the penny!

The fact is, we have never had a coin worth so little. Take a guess at how much a penny was worth, in today’s money, in the year you were born. Then check your answer against the following chart, which shows just how much that little sliver of copper and zinc has shrunk in value just over your own lifetime:

Look at it this way:

If we got rid of the penny, our smallest coin would be the nickel. That would take us back to where we were in 1973.

If we got rid of the penny and the nickel, our smallest coin would be the dime. That would take us back to 1947.

If we got rid of the penny, the nickel, and the dime, our smallest coin would be the quarter. That would take us back approximately to where we were in 1909, when the current design for the penny was introduced to honor the centennial of Lincoln’s birth.

So, who wants to keep the penny, and why? The pro-penny group Americans for Common Cents is reportedly backed by the zinc lobby. That stands to reason, since the penny has been 95 percent zinc since 1983. Coinstar, Inc., is another avid backer of the penny. They make the automatic coin counting machines you sometimes see in supermarkets. Curiously, these two organizations have a hard time presenting a common front. Americans for Common Cents claims that 68 percent of Americans favor keeping the penny. However, Coinstar’s polling shows that only a minority want to leave the penny as it is. Coinstar finds that 31 percent of those polled would be willing to keep the penny, but only if it can be made of something cheaper than zinc. A zinc penny costs well over one cent to produce.

Industry lobbying aside, it seems that people’s biggest fear is that rounding of prices after elimination of the penny would lead to inflation. But, for three reasons, that is unlikely.

First, the United States, like Canada and other countries that have eliminated small-denomination coins, would undoubtedly establish rules to regulate rounding. Canadian rules require that cash transactions be rounded down to the nearest nickle for amounts ending in $.01, $.02, $.06, and $.07, and rounded up for amounts ending in $.03, $.04, $.08, and .09.

The rounding would occur at the cash register. Nothing would prevent merchants from posting prices in one-cent increments. Many retail prices are set a “price points” like $2.99 on theory that consumers perceive them as much cheaper than $3.00. For marketing reasons, those prices would be unlikely to change. Under the Canadian system, then, you might go into a convenience store and buy a can of cat foot for $1.59, a dozen eggs for $2.59, and a soda for $.99. Your total bill would be $5.17. If you paid cash, that would be rounded to $5.15, saving you two cents.

Second, keep in mind that rounding applies only to cash transactions. If you pay by check, credit card, or debit card, you would pay exactly $5.17 for your cat food, eggs, and soda, the same as now. In the United States today, cash payments account for only about 0.2 percent of all transactions. If we leave out the kind of wire transfers used to settle large financial transactions, the share of cash rises to about 2.4 percent, which is still very little. Even if every merchant in the land cheated on the rounding rules, it would not have a measurable impact on inflation.

Third, as any economist will tell you, the rate of inflation has nothing at all to do with the size of the coins a country has. Even if rounding to the nearest nickel produced a transitional impact on prices, it would be confined to a very short period. Over the long term, the rate of inflation depends on macroeconomic factors such as fiscal and monetary policy, productivity growth, and exchange rates, none of which would be affected by a change in the coinage.

There is no need to theorize, though. All we have to do is to look at what happened in Canada, which issued its last penny in 2012. Did that country see a surge in inflation? No. The Canadian inflation rate was 2.89 percent in 2011, 1.53 percent in 2012, and 0.93 percent in 2013. Eliminating the maple-leaf penny did not, after all, turn Canada into Zimbabwe with polar bears.

Photo credit for Indian head cent: U.S. Mint via Wikimedia.org..