Most of the funding from the Payroll Protection Program went to business owners and high-earning households, Insider reports.
Congress in 2020 approved $510 billion in low-interest forgivable loans worth up to $10 million a pop amid the pandemic. The program was intended to keep businesses able to pay their employees and overhead costs amid pandemic lockdowns.
A new study from researchers at the Federal Reserve and the Massachusetts Institute of Technology found that the program saved 1.98 million to 3 million years of employment over 14 months but little actually went to workers.
About $115 billion to $175 billion in PPP funds covered paychecks, or about 23% to 34% of the program’s funding.
The remaining 66% to 77% went to business owners, shareholders, creditors, and suppliers.
High cost per job saved:
The study estimated that the PPP spent about $170,000 to $257,000 for every job year saved.
"PPP's breakneck scale-up, its high cost per job saved, and its regressive incidence have a common origin: PPP was essentially untargeted because the United States lacked the administrative infrastructure to do otherwise," the study says.
Overall, the study found that $365 billion, or 72% of the program’s funds, went to the top 20% of earners while the bottom 20% got $13.2 billion, or 2.6% of the funding.
Less effective than stimulus, UI:
The program also provided a lower per dollar boost to the GDP, about half of the boost the GDP got from the stimulus checks and enhanced unemployment benefits, according to the study.
"Taking account of the highly distributionally-skewed incidence of PPP payments, we concur that PPP was likely the least effective of the three programs in boosting the macroeconomy," the authors wrote.
The study faulted the minimal loan qualifications, which had few requirements outside of having fewer than 500 employees and attesting that their business had suffered as a result of the pandemic.
The authors recommended a more targeted approach in future emergencies.