Studies now examining how many jobs 13-month initiative saved

The United States (US) government’s sprawling Paycheck Protection Program (PPP) officially wraps up its 13-month existence on Monday (May 31).

A number of studies are now on the way by economists to figure out how many jobs the PPP have saved. Bloomberg is reporting that one of the most cited studies, led by Massachusetts Institute of Technology economist, David Autor, pegged the jobs saved by PPP’s first round at a fairly low 2.3 million at a high cost of US$224,000 per job.

At the other end of the spectrum, two Federal Reserve economists estimated in January that PPP preserved 13 million jobs at a more modest $43,000 each. Overall, Bloomberg estimates that the American administration has distributed more than 11.6 million forgivable loans worth over US$795 billion to small businesses since April 2020.

This is said to be an unprecedented programme for a segment of the economy that rarely receives direct aid – let alone bailouts – during economic crises.

Two extensions already given to programme

The programme was made for the current unprecedented time as the local economy, which bore the brunt of the financial hit from shutdowns, needed to be saved and fast, along with the tens of millions of workers employed by small firms. The PPP was extended twice by Congress and has been beset with operational glitches since the initial round with lenders livid over having received insufficient guidance in how to process loans.

This is in addition to borrowers complaints that the largest banks were favoring existing customers over other loan applicants. More recently, some lenders have complained the agency running the programme, the Small Business Administration, hasn’t provided enough information about how much money was left, leading to a scramble to get in last-minute applications.

However, SBA spokeswoman Shannon Giles advised that the agency kept lenders informed about the funding level on a weekly basis through the programme’s lender portal.

According to Bloomberg, about 46 per cent of small businesses that had their PPP loans fully funded were forced to cut jobs at some point since March 1, 2020, while 71 per cent of those that got no PPP loans said they reduced their workforce, according to a 2021 Federal Reserve survey.

Forgivable conditions for companies getting PPP loans

The survey showed that companies getting PPP loans, which were forgivable under conditions including spending a majority of the funds on payroll, were much more likely to try to rehire the workers later. The broad-based programme was not evenly distributed, as larger companies with ties to banks were able to get loans worth millions of dollars without having to offer proof of hardship, while tiny businesses and sole proprietors struggled with paperwork, worried about ever-changing rules to get the one per cent loans forgiven.

Upper-income areas received substantially more loans than lower-income communities, according to research. Minority groups, aside from Asian Americans, struggled to tap into the programme as much but overall the loans helped keep local businesses afloat during the depths of the pandemic and government-imposed quarantines.