Was the Paycheck Protection Program Effective? — St. Louis Fed Regional Economist (snapshot)

Summary

Archived text snapshot of a Regional Economist article from the Federal Reserve Bank of St. Louis, published July 6, 2022, by William R. Emmons and Drew Dahl, asking whether the Paycheck Protection Program was effective. The program, established under the CARES Act signed March 27, 2020, began distributing forgivable loans on April 3, 2020 and had more than 90% of roughly $800B forgiven by June 20, 2022. Citing Autor et al. in the Spring 2022 JEP, the authors find it poorly targeted: about 2.97M jobs a week were preserved in the second quarter of 2020, yet the cost per job-year saved was $169,000 to $258,000 against average wages and benefits of $58,200. Only about one-quarter of funds reached workers whose jobs were saved, and about 72% of PPP dollars went to households in the top 20% of the income distribution.

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Archived text snapshot. Source: stlouisfed.org — Regional Economist, July 6, 2022 , by William R. Emmons and Drew Dahl. Captured 2026-06-27.

Was the Paycheck Protection Program Effective?

Key takeaways

- The PPP provided relief to small businesses during COVID-19, was implemented quickly, and wound up most operations within two years (90%+ of ~$800B forgiven by June 20, 2022).
- Per Autor et al. (2022), the PPP was not well targeted: only about one-quarter of funds supported jobs that otherwise would have disappeared.
- Benefits flowed disproportionately to wealthier households rather than rank-and-file workers.

Background

Established under the CARES Act (signed March 27, 2020), PPP began distributing forgivable loans April 3, 2020 — three weeks after the national emergency declaration (far faster than ARRA after the Great Recession). Loans were uncollateralized, nonrecourse, 100% SBA-guaranteed, forgivable if used for payroll/utilities/rent/mortgage with employment targets maintained; ≤500-employee firms (and sole proprietors/independent contractors) eligible; max term initially 10y (later 2y), max rate initially 4% (later 1%).

Effectiveness — timely but poorly targeted

Timeliness: high. Targeting: poor. Autor et al. ("The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did It Go There?", JEP Spring 2022) compared employment at firms just under vs. just over the size threshold and estimated PPP boosted firm employment 4–10% in mid-May 2020 and 0–6% by year-end; ~2.97M jobs/week preserved in Q2 2020 and ~1.75M/week in Q4. But cost per job-year saved was $169,000–$258,000 — far above the $58,200 average wages+benefits for small-business employees in 2020 — i.e., roughly $4 spent per $1 of wages/benefits received by workers in "saved" jobs; ~$3 of every $4 ("leakage") went to small-business owners, suppliers, and lenders.

Progressivity: the study estimated only ~one-quarter of the $800B reached workers whose jobs were saved, and ~72% of PPP funds were captured by households in the top 20% of the income distribution. By comparison, ~20–25% of unemployment-insurance payments and only ~10–15% of economic-impact-payment dollars went to the top quintile (the latter more progressive due to income caps).

Conclusion

The PPP was a very large, very timely intervention (~3M jobs saved at the Q2-2020 peak; $800B distributed within two years) but poorly targeted — almost three-quarters of benefits went to unintended recipients (owners, creditors, suppliers) — and regressive relative to other major COVID-19 relief programs.

Citation: Emmons, William R., and Drew Dahl (2022). "Was the Paycheck Protection Program Effective?" Regional Economist, Federal Reserve Bank of St. Louis, July 6, 2022.

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