Research shows that the PPP spent hundreds of thousands of dollars for each job it saved

Yesterday, I wrote about new research which suggested that 15 percent of Paycheck Protection Program (PPP) loans were fraudulent. There was always going to be an element of this, I think, given the trade off between the need to target the aid — which takes time — and the need to get the aid to businesses quickly. The question is whether the cost of this fraud was offset by the benefits in terms of jobs saved.

Sadly, the research so far shows that it wasn’t.

First, a paper from economists David Autor, David Cho, Leland D. Crane, Mita Goldar, Byron Lutz, Joshua Montes, William B. Peterman, David Ratner, Daniel Villar, and Ahu Yildirmaz uses “administrative data on employment from the payroll processing firm ADP in order to provide a preliminary assessment of the PPP’s effect on employment at small firms.” The authors:

“…estimate that through the end of May the PPP increased the level of employment at eligible firms by between 2 percent and 4.5 percent. These estimates imply that the PPP boosted the level of private employment in the U.S. by between 1.4 and 3.2 million, with a mid-point of 2.3 million.”

With loans under the program totaling $780 billion, that mid-point works out at $339,000 per job saved.

Next is a paper from economists Raj Chetty, John N. Friedman, Nathaniel Hendren, Michael Stepner, and The Opportunity Insights Team. They have built:

“…a publicly available database that tracks economic activity at a granular level in real time using anonymized data from private companies. We report daily statistics on consumer spending, business revenues, employment rates, and other key indicators disaggregated by ZIP code, industry, income group, and business size.”

Regarding PPP, they find that “loans increased employment at small businesses by only 2 percent, implying a cost of $377,000 per job saved,” which is well in line with the previous estimate.

Finally, there is a paper from economists João Granja, Christos Makridis, Constantine Yannelis, and Eric Zwick which uses “loan-level microdata for all PPP loans and high-frequency administrative employment data to present three main findings,” one of which is that “…the short- and medium-term employment effects of the program were small compared to the program’s size” Indeed, the authors find that:

“When considered relative to the scale of the PPP program, the employment effects we estimate are fairly modest. The program disbursed $525 billion in total loans, which implies a
cost-per-job ranging from $109,000 to $164,000.31.”

(There are, indeed, different numbers for how much money the PPP distributed, including $525 billion and $780 billion)

So, to offset against fraud estimated at $76 billion for the scheme, we have little to show, it seems, in terms of employment benefits. Taken together, this research suggests that the PPP saved relatively few jobs at a high cost and was a poor allocation of capital.