The Nationwide Shortage of Coins is the Latest Consequence of the COVID-19 Pandemic in the United States

The nationwide shortage of coins is the latest consequence of the COVID-19 pandemic in the United States. William Dickens, professor of economics and social policy, said: “People avoid going to public spaces, including vending machines and laundromats, and reduce indirect physical contact caused by money, so the amount of coins in circulation has declined.”

“The coins were not recycled. They’re lying in pockets or dresser drawers, and they didn’t come back into the economy system,” he said.

Places such as vending machines and laundromats, are usually large coin storage centers. The coins are converted into banknotes at banks, where they can then be circulated back among the customers. But if people stop paying change and the banks close their branches, the whole system will come to a standstill.

Dickens said the shortage of coins may cause inconvenience for people to buy snacks and wash clothes, and it will have serious consequences for those who usually pay in cash or cannot use bank accounts.

According to a survey by the Federal Reserve in 2018, 6% of people in the United States do not have cheques, savings or currency market accounts. The survey suggested another 16% have bank accounts but rely on other sources of funding, such as bills of exchange, check cashing services, pawnshop loans, automatic equity loans, payday loans, check advances or tax refund advances.

“For those who cannot pay with a credit or debit card,” Dickens said, “the shortage of coins completely limits their ability to pay.”

“It’s essentially a price hike for people who usually need to spend regular change because they have to spend one-dollar notes,” he said, “in this regard, it is a big economic problem.”

The Fed is working with US mints to produce more coins, but the process will be slow. At the same time, retailers may choose to round the price to the nearest dollar and generally use change trays at retail counters to encourage customers to “spend a cent”.

Dickens said that in the long run, this shortage of tokens is likely to intensify the growing trend of gradually avoiding the use of physical currencies in a bid to support electronic or card-based payments.

“My guess is that the shortage will continue for some time and we will find other solutions,” he said.