Why do the 1 and 2 euro cent coins exist and why are they used?

Question

Let's say I go to the supermarket. I buy some milk priced at 2.34 €; at the cash I'm expected to either give 2.34 € (not 2.30 €) or give 2.35 € and wait for the 1 cent change. If I say I don't want the change it's usually considered very strange, almost "rude" (sort of a "I'm rich" attitude).

But this really doesn't seem to make sense. Having to deal with 1 or 2 euro cent coins adds roughly 5-10 seconds to each translation we make (for each person involved), and an unskilled uneducated low pay €10 per hour worker earns almost 3 cents every 10 seconds.

Just having the 1 and 2 cent coins in your wallet increases time spent for transactions since it makes other coins (especially the 5 cent coins) more difficult to find.

So why were they created? Was this problem not anticipated or not considered serious? Why do people use them? Being "precise" about this seems to matter enormously to people besides me; some are willing to wait even 10 minutes if the coins ran out to get their single cent.

Answer 1

While dealing with US pennies and not 1 and 2 cent euro pieces, you may find this Wikipedia article of interest and analogous: Penny debate in the United States

This article briefly summarizes both the arguments for and against retaining the one cent piece. The arguments against include:

• Pennies cost more than their face value to manufacture (granted, I'm not sure if this applies to the 1 and 2 cent euro pieces)
• Lost productivity and opportunity cost of use - (as you alluded to) the extra time incurred in dealing with pennies is, in the US, around $3.65 per person per year, or about $1 billion in the US (although another estimate puts it around $300 million). This is based on the estimate that the average American earns a penny every two seconds, and pennies lengthen transactions by more than two seconds
• Pennies are typically not accepted by vending machines, toll booths, or in bulk. Furthermore, many people tend not to use pennies to pay for items, but instead only receive them in return.
• According to one economist, eliminating pennies would not have a significant effect on prices

Arguments for preservation include:

• Some charitable organizations receive donations in coin jars, and pennies make up the bulk of these donations
• Historical sentiment
• Deflationary effects - considering the fact that rising inflation causes the cost of manufacturing these coins to exceed their face vlaue, this may act as a check on inflation caused by central banks.

Already a number of countries have removed their equivalents of the one and two cent coins, including New Zealand, Sweden, Australia, Israel, and Brazil (to name a few).

Answer 2

I guess other than tradition and inflation, probably because the merchants want them.

In the US, what currently costs $2.00 used to cost $0.10. So 75 years ago, those individual cents made a pretty bid difference. Inflation causes prices to go up, but doesn't get us to just change our currencies patterns.

In your example, you are assuming that in an average day, the rounding errors you are willing to accept happen a couple of times. 2 or 3 cents here and there mean nothing to you. However to the merchant, doing hundreds or thousands of transactions per day, those few cents up and down mean quite a bit in terms of profit.

To an individual, looking at a time frame more than a single day (because who only participates in economies for a single day) there are potentially millions of transactions in a lifetime, mean potentially giving away millions of dollars because they didn't want to wait.

And as for the comment that people working each 3 cents every 10 seconds, I would assume at least some of the time when they are waiting for rounding errors, they are not at work getting paid. That concept is assuming that somebody is always willing to pay them for their time regardless of where that person is in the world; I have no facts and wild assumptions, but surely that can't be true for even a majority of workers.

Finally, you should be happy if you happy to have an income high enough that you don't care about individual cents. But there are those business people who see opportunity in folks like you and profit greatly from it. I personally worry very much about who has my money; gov't gets paid to the penny and I expect returns to the penny. A super polite service employee who smiled a lot serving me a beer is getting all the rounding errors I have.