Most PPP Funding Didn’t ‘Protect Paychecks’ After All

The federal government’s Paycheck Protection Program was meant to keep employees of small businesses in their jobs after the pandemic hit, but a new study estimates the majority of the money it paid out went to business owners, shareholders, creditors, and suppliers. 

A team of Federal Reserve and MIT economists and researchers estimates that the program saved 2 million to 3 million jobs over its first 14 months, and basic math suggests that if the program loaned $510 billion to small businesses in those months, it paid roughly $169,000 to $258,000 to keep one job for one year.

But employees themselves didn’t earn nearly that, the researchers said in a paper published by the National Bureau of Economic Research Monday. In fact, assuming that actual pay for each saved job averaged $58,200, it looks like just 23% to 34% of the money paid actually went to worker salaries and benefits, they said. 

The analysis provides ammunition for critics of the program, which was fraught with rollout issues and allegations of misuse and inequitable distribution. Established by the CARES Act pandemic relief bill, the PPP ended up giving 11.8 million loans worth $800 billion, almost all of which is slated to be forgiven, according to the study.  Business owners with fewer than 500 employees could use the loans of up to $10 million for a wide range of expenses, including rent, utility bills, or even looting or vandalism caused in 2020. 

The study suggests that other pandemic relief programs—multiple rounds of stimulus checks and extra unemployment benefits—were “far more equally distributed,” the researchers said. Since business owners and shareholders tend to be concentrated at higher income levels, the data implies that most of the PPP money went to the top 20% of income earners, they said.

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