The bulk of the loan money handed out through the government’s $800 billion Paycheck Protection Program (PPP) didn’t go to workers—it helped business owners and shareholders. That’s the finding of a new study published by top economists at the National Bureau of Economic Research. The group, which includes 10 professors and researchers—among them MIT economics professor David Autor and several Federal Reserve economists—writes in their paper that the vast majority of PPP loans given out during the first round of disbursements, in 2020, weren’t used to offset employee paychecks. Based on the numbers they crunched, primarily coming via data from payroll-management behemoth ADP, they estimate that somewhere between 23% and 34% of PPP dollars went to workers who would’ve otherwise lost their jobs. The rest of the loan money—a full two-thirds to three-fourths—landed in the pockets of either the company’s owners or shareholders.
The authors estimate the program did manage to preserve 2 to 3 million of what they call “job years” of employment, meaning PPP’s impact on job loss was potentially considerable. But they add this came at a cost of $170,000 to $257,000 per job-year saved—the average amount disbursed by the government. They note that 94% of the companies that applied for a PPP loan received a PPP loan. But because the criteria for loan forgiveness required keeping employees on payroll, yet also capped payroll costs at $100,000 in cash compensation per employee, that means the lion’s share went elsewhere.
Equally troublingly, the distribution was “highly regressive,” because it “overwhelmingly accrued to high-income households.” According to their paper, 72% of funds flowed to the top one-fifth of households by income, even though, statistically speaking nationwide, this group accounts for just 35% of earnings. They add the government’s two other pandemic-aid programs—pandemic unemployment insurance and the stimulus checks—were spread far more equitably among American households.
Numerous studies before now have guessed the total amount of fraud with PPP was high, and these stories have popped up frequently in the media anecdotally. One of the more recent estimates, released in August, guessed the amount of fraud among PPP loans could be serious—as high as 15%. That’s another factor the authors note: “Ironically, the program feature that arguably made PPP’s meteoric scale-up possible is also the feature that made it potentially the most problematic: The program was essentially untargeted.” They write that companies “merely needed to attest that they were ‘substantially affected by COVID-19’ to qualify, and almost all did so.” They conclude that a large proportion of PPP loan dollars likely went to businesses that “would have remained viable and retained their employees even absent PPP.”