Workers got less than 35% of the $800 billion in PPP loans

The majority of the mortgage cash handed out by the authorities’s $800 billion Paycheck Safety Program (PPP) didn’t go to employees—it helped enterprise homeowners and shareholders. That’s the discovering of a new study revealed by prime economists at the Nationwide Bureau of Financial Analysis. The group, which incorporates 10 professors and researchers—amongst them MIT economics professor David Autor and several other Federal Reserve economists—writes in their paper that the overwhelming majority of PPP loans given out throughout the first spherical of disbursements, in 2020, weren’t used to offset worker paychecks. Based mostly on the numbers they crunched, primarily coming by way of information from payroll-management behemoth ADP, they estimate that someplace between 23% and 34% of PPP {dollars} went to employees who would’ve in any other case misplaced their jobs. The remaining of the mortgage cash—a full two-thirds to three-fourths—landed in the pockets of both the firm’s homeowners or shareholders.

The authors estimate the program did handle to protect 2 to three million of what they name “job years” of employment, that means PPP’s affect on job loss was doubtlessly appreciable. However they add this got here at a price of $170,000 to $257,000 per job-year saved—the common quantity disbursed by the authorities. They notice that 94% of the corporations that utilized for a PPP mortgage obtained a PPP mortgage. However as a result of the standards for mortgage forgiveness required preserving workers on payroll, but additionally capped payroll prices at $100,000 in money compensation per worker, which means the lion’s share went elsewhere.

Equally troublingly, the distribution was “extremely regressive,” as a result of it “overwhelmingly accrued to high-income households.” In keeping with their paper, 72% of funds flowed to the prime one-fifth of households by earnings, despite the fact that, statistically talking nationwide, this group accounts for simply 35% of earnings. They add the authorities’s two different pandemic-aid packages—pandemic unemployment insurance coverage and the stimulus checks—have been unfold way more equitably amongst American households.


Quite a few research prior to now have guessed the complete quantity of fraud with PPP was excessive, and these tales have popped up continuously in the media anecdotally. One of the newer estimates, launched in August, guessed the quantity of fraud amongst PPP loans might be severe—as high as 15%. That’s one other issue the authors notice: “Satirically, the program characteristic that arguably made PPP’s meteoric scale-up doable can also be the characteristic that made it doubtlessly the most problematic: This system was primarily untargeted.” They write that corporations “merely wanted to attest that they have been ‘considerably affected by COVID-19’ to qualify, and virtually all did so.” They conclude that a big proportion of PPP mortgage {dollars} possible went to companies that “would have remained viable and retained their workers even absent PPP.”