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The failures and future of the Paycheck Protection Program

President Joe Biden visits W.S. Jenks & Son hardware store, a small business that received a Paycheck Protection Program loan, Tuesday, March 9, 2021, in Washington. (AP Photo/Patrick Semansky)
President Joe Biden visits W.S. Jenks & Son hardware store, a small business that received a Paycheck Protection Program loan, Tuesday, March 9, 2021, in Washington. (AP Photo/Patrick Semansky)

The primary goal of the Paycheck Protection Program? Keep people in their jobs.

“The thing that we kept telling ourselves, was like, there has to be help coming. They have to do something,” Alexis Percival, co-owner of New York City restaurants Ruffian and Kindred, says. “Like, we’re in collapse.”

But new analysis finds only about a quarter of the $800 billion program went to protecting paychecks.

“It was like, you know, just some really nasty choices. Of course we want to keep people employed, but this makes absolutely no sense,” Percival adds.

Today, On Point: The Paycheck Protection Program. Where did the money go?


David Autor, professor of economics at MIT. Co-author of the working paper “The $800 Billion Paycheck Protection Program: Where Did The Money Go and Why Did It Go There?” (@davidautor)

Lydia DePillis, reporter at ProPublica. (@lydiadepillis)

Also Featured

Alexis Percival, co-owner of New York City restaurants Ruffian and Kindred.

Interview Highlights

On a definition of the PPP

David Autor: “The name sort of suggests it’s about protecting paychecks, which would suggest it’s about maintaining employment. But of course, firms have other costs than just workers. And they couldn’t simply pay their workers and not pay their suppliers or creditors or lenders and stay in business. So only 60% of the dollars in PPP actually had to be spent on paychecks and on payroll. The other 40% could be spent on other qualifying expenses. So I think if you kind of parsed the legislation, you would say the money was intended to preserve employment. It wasn’t intended that every dollar would go to a worker who otherwise would have lost their job. Some of that was meant to subsidize or support the cost of keeping a business open.”

The majority of PPP funds ended up in the hands of Americans whose household income is in the top 20% in this country. So how did that happen?

David Autor: “The first thing to realize is that most of the PPP money didn’t actually go to workers who otherwise would have lost jobs. So to take that determination, you need to kind of estimate how many jobs were preserved because of PPP. … Determining the causal effect, what jobs were saved, means contrasting firms that were eligible, not eligible. Or firms that got it early, versus firms that got it late, to have a variety of strategies. And we estimate that PPP preserved about two to three million person years of employment. That means one job for one year. Now, if it preserved two jobs each for half a year, that’s also a person year of employment. So, the average cost of doing that was somewhere between $175,000 and $250,000 per job preserved. And of course, the median earnings of workers is more like $50,000.”

On understanding the jobs preserved through the PPP

David Autor: “It’s important to have size. If you speak to people, small business owners, they say, yes, this preserved us, saved us. It got us through the storm. It allowed us to restore employment, keep our workers on the payroll. We didn’t have to close down. And that’s all true. Those stories are true. And that’s especially true for the smallest of businesses. Those with 25 to 50 employees. But a lot of the money went to much larger firms that were not nearly in the same type of dire straits. And those firms … they were not rescued. They were just happy to receive the money.”

Transcript: A New York City Restaurant Owner Shares Her Story Navigating The Paycheck Protection Program

MEGHNA CHAKRABARTI: Alexis Percival is the co-owner of a small restaurant group in New York City. They have two restaurants, Kindred and Ruffian. In March 2020, as COVID shut down New York, Alexis told us that her restaurants started hemorrhaging money immediately. Her group didn’t know if they’d be able to stay in business longer than a week.

ALEXIS PERCIVAL: The thing that we kept telling ourselves was like, there has to be help coming. They have to do something. Like, we’re in collapse.

CHAKRABARTI: They knew they’d have to close at least temporarily, which meant laying off some of their staff. So they helped their employees navigate the unemployment insurance system. And in late May, Percival and her co-owners applied for funding from PPP. It was a complex, labyrinthine process challenging enough in itself, but Alexis said it worked for her.

Their first successful application in 2020 yielded around $300,000 for both restaurants. In March 2021, they applied again. Her group applied again, and received $420,000. But having the loan approved and getting the actual cash were two different things. So Alexis told us she approached the group’s longtime bank and asked if the loan could be processed there. But the bank said they couldn’t help.

PERCIVAL: We had an existing bank that we used for everything at both restaurants, and that was not who our lending came from. They claimed that the money had already been distributed.

CHAKRABARTI: Another hurdle? Maintaining payroll. A requirement, as we’ve discussed, if the loan was to be forgiven. Her restaurants employed about 30 people total. And as we mentioned, prior to closing, Alexis and her fellow owners had helped their staff apply for unemployment. And at the time, that meant her staff was receiving an extra $600 a month for workers through that unemployment assistance, so it didn’t make sense for some of them to come back to work.

And Alexis says the group did spend 70% of their first PPP loan on payroll. The rest in rent and utilities. For their second loan, they spent 60% on payroll. But again, that matches the program’s requirements, the changes in the program’s requirements. So the other 40% went to rent, utilities, food and wine vendors and the construction of an outdoor dining area.

PERCIVAL: Like a lot of businesses, both in and out of the restaurant industry, your vendors provide you credit terms, so your bills aren’t due for 30 days, but they do come due. Our landlords have been great. They they did work with us. But rent, obviously New York City, the rent is too damn high. So, that was a major consideration. There’s always things, your contractors money for build outs. There’s always stuff.

CHAKRABARTI: Alexis also says she and three other owners, her fellow owners, sometimes stop paying themselves in order to stay afloat.

PERCIVAL: Oh God, yeah. We’d put ourselves on unemployment twice. We took pay cuts. Yeah, yeah, that’s always the first thing we think of. I want to try to kind of minimize the impact on the staff as much as possible while, you know. We’re a young partnership, we have responsibilities and rent too.

CHAKRABARTI: Alexis did also tell us, though, that PPP saved her business two times over, and she doesn’t know what would have happened if the money hadn’t come through.

From The Reading List

ProPublica: “They Promised Quick and Easy PPP Loans. Often, They Only Delivered Hassle and Heartache.” — “In May 2021, Terry Kilcrease thought he saw a lifeline. He was out of work, living in a hotel in Lewisville, Texas, when he ran across a promising ad on Facebook. People who worked for themselves, it said, could still get loans from the government’s then-13-month-old pandemic Paycheck Protection Program.”

ProPublica: “The Government Gave Free PPP Money to Public Companies Despite Warning Them Not to Apply” — “As Congress launched a historic bailout to keep businesses afloat at the outset of the pandemic, government officials stressed that the loans were for mom-and-pop operations that didn’t have another easily available lifeline.”

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