- Category: Penny Economy
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.
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.)
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.
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.
Rounding will have a large economic toll requiring public education programs, retraining of employees, and reprogramming computer cash registers and other automated equipment.