"Effects of Price Rounding on the Economy" ....
in response to the arguement on "Americans for Common Cents"
... "Money Penny",
"The Penny's Economic Importance" .. "Effects of Price Rounding"
(See Article)
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Quote..
"Merchants would have an incentive to set prices that ensure rounding
up on single item cash purchases. Consumer inflation hits low income and
fixed income groups the hardest."
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The fallacy with this statement is that, as of 2024, somewhere between 60% and 80%
of all merchant transactions are handled via computerized point of sale (POS) terminals.
All POS software currently round (up or down) all transactions (after sales tax) to the nearest
penny. If we were to stop using pennies, all that would happen would be that merchants
would simply configure their POS systems to round to the nearest nickel instead of a penny.
Mathematically, if roughly half of all odd cent transactions are rounded up and the other half
rounded down, this would make the net annual economic effect just about zero.
Also, for argument sake, if the average of all 800 million weekly merchant sales transactions
across the country is $45.38 and we were to only round up the $.02 cents to the nearest
nickel, the average transaction would be
increased by 0.044% (4 hundreths of a percent). Heck, normal inflation is 1% or more, so normal
inflation is 23 times greater than if we only rounded up. But POS software rounds up and
down, so the net effect would be effectively 0 on the average annual cost-of-living.
Also, whoever made this statement apparently was never a merchant. Merchants set prices
all the time to maximize their profits. Many have some very sophisticated pricing models based
on time of day, time of year, sales, coupons and more. Wal-Mart does its pricing based on super
low prices and high volume. I would be willing to bet you that the tiny profit from rounding up
would virtually never enter into the equation. Rounding has already been going on for years.
I know many taverns and bars have been rounding to a quarter for years. You virtually never
see them digging in their cash draw for nickels and dimes for change. One merchant I know
rounds all transactions to a dollar. Their rounding has less to do with making a little
more money and more to do with saving time and making merchandise pricing easier.
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Quote..The effect in dollar terms on the government and private sector could
be significant, perhaps totalling over $2 billion after five years.
(This is the most conservative estimate possible based on purchases by adults 18 years of age and older.
It does not include transactions by the population below 18 -- a group that makes even a larger proportion
of expenditures in cash.)"
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Zero (0) is still zero.
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Quote.."Although rounding might only have a minimal effect on the Consumer Price Index (CPI),
in dollar terms even a seemingly small effect could mount over time to a considerable sum
given that virtually all government outlays (i.e., social security and welfare benefits)
and many private sector costs (i.e., wages) are indexed to the CPI."
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Zero (0) is still zero. All payments (private and government) should be rounded to the nearest nickel also.
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Quote.."Increased prices due to rounding ultimately would fall disproportionately on those
least able to afford it, the poor and the elderly, because they make more small
cash purchases."
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Zero (0) is still zero.
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Quote.."Rounding will have a large economic toll requiring public
education programs, retraining of employees, and reprogramming computer
cash registers and other automated equipment."
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Our members report that it took about 5 seconds of retraining per employee. "Do nickels, not pennies.." training done.
Several POS software vendors already support this option in their existing systems and other POS software
vendors would take about an hour to add it to their products.
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