After the eradication of the penny began in 2012, Canadians naturally speculated about the potential removal of the nickel.
Some organizations, such as the credit union Desjardins, argue that the nickel should be eradicated in the next five years. The change would logically entail the adaptation of other coins, such as the quarter, to stop measuring five-cent increments of value.
A massive overhaul of our coin system would undoubtedly be needed, with perhaps 10-cent, 20-cent, and 50-cent pieces instead of 25-cent coins — an overhaul which, like any governmental initiative, is not without cost. For example, eliminating the penny cost Canada $38 million. Evidently, eliminating the nickel would be both costly and a hassle.
However, the costs of not eliminating the nickel are even worse. Minting it is a money-losing process: the similar American nickel costs 9.4 cents in materials to produce. Cutting government costs in the long run was one of the rationales for the Canadian penny’s removal, and it applies equally well to the nickel. It wouldn’t even be a novel move: countries such as New Zealand have eliminated five-cent coins, and others, like Australia, are strongly considering following suit.
The building effects of inflation render them further unnecessary. One needs look no further than the original reason that our country created such small denominations of currency to realize that society no longer needs such a low-valued piece.
The Bank of Canada targets two percent inflation each year, causing money to be worth less than it was the previous year — a process familiar to many frustrated consumers well-aware of ever-rising prices. While the annual change in value may be relatively small, over time, the effects of inflation grow drastic, with a dollar regularly losing half of its value in 35 years.
The Bank of Canada keeps records of the inflation experienced by consumers since 1914. From these inflation figures, we can determine the purchasing power of money over time. These calculations show that the value of the nickel in 1914 is equivalent to a value of less than a quarter of a cent today.
While it made sense for Canadians of 1914 to use nickels, they certainly never considered implementing a quarter-cent piece, simply because its value would be trivially low. However, today we mint and carry with us a coin worth less than a 20th of its original value. Canadians never intended or demanded such a low-valued coin, yet because we’ve failed to adapt to inflation, we pour money into minting these unprecedentedly useless coins.
Inflation is inevitable. While its eradication may have base costs, the resources we pour into making and carrying nickels each year will only add up as the value of the nickel goes down. Historical precedent shows that Canada has no need for a piece of such low purchasing power, so it would be best for Canada to leave the nickel behind as soon as possible.