The majority of PPP loans went to business owners and high-earning households, a new study shows

The Payroll Protection Program issued $510 billion in uncollateralized, low-interest loans of up to $10 million by the end of the year. According to a study authored by economists earlier this month, workers weren't the main beneficiaries of the program because businesses kept their doors open.

The authors, including Massachusetts Institute of Technology professor David Autor and economists from the Federal Reserve, found that over 14 months,PPP saved over 3 million years of employment. The study was done using data from the Bureau of Labor Statistics.

The economists estimated that between $115 billion and $175 billion of the funds went to paychecks, meaning that only 23% to 34% of the funds went to workers who would have lost their jobs.

Where did the rest go? The majority of the money went to business owners and stakeholders.

The program spent between $170,000 and $257,000 per job-year saved.

The working paper shared by the National Bureau of Economic Research states that the United States lacked the administrative infrastructure to do otherwise and that the high cost per job saved and the breakneck scale-up ofPPP have a common origin.
The authors estimated that the top-fifth of the country's income and business made up a disproportionate amount of the money that flowed to households. The bottom quintile received $13.2 billion, or 2.5% of the $510 billion.

The Congressional Budget Office stated that the per dollar boost to GDP was 0.36, compared to 0.60 and 0.67 for theStimulus checks and enhanced unemployment insurance checks.

The study states that the most effective of the three programs was likely to bePPP.

The authors blame the lack of loan qualifications for the problem. The first two installments of $510 billion had few requirements beyond having 500 or fewer employees and attesting to financial harm due to the Pandemic.
The US should prepare a more sophisticated administrative system like those of other high-income countries so that it can execute programs that target the most needy Americans during future emergencies, according to economists.