The federal Paycheck Protection Program (PPP) saved about 3 million jobs at its peak during the coronavirus pandemic, but was poorly targeted, with nearly 75% of its benefits going to unintended recipients rather than to workers, according to a new Federal Reserve Bank of St Louis Report.

The PPP provided loans to help businesses maintain payrolls, hire staff and cover costs, but did not support jobs at risk of disappearing, and the money went disproportionately to households the wealthiest, according to the Fed study.

Many small businesses found themselves barred from PPP loans in what was seen as a botched rollout of CARES Act relief. The problem has been magnified for small black-owned businesses.

PPP has offered up to $10 million in unsecured forgivable loans for businesses with fewer than 500 employees. Large companies received funding from banks with which they had pre-existing relationships, while some of the most vulnerable business owners and family businesses were left behind as funds dried up.

The program was implemented by the Small Business Administration (SBA) and allowed loans to be forgiven if businesses used the funds to maintain payroll, cover utilities, rent and other expenses, and maintain job goals.

Only a quarter of PPP funds went to support jobs that would have disappeared during the pandemic, according to a research breakdown, Newsweek reported.

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The average salary and benefits for a small business employee was $58,200 in 2020. Research found that the cost per job saved for a year was $169,000 to $258,000.

Taxpayers paid for the PPP program to the tune of $4 for every $1 of wages and benefits received by workers in the jobs that were saved.

“The PPP was a very significant and very timely fiscal policy intervention, saving around 3 million jobs at its peak in the second quarter of 2020 and handing out a good $800 billion within two years of the onset of the COVID-19 crisis. “, economists William Emmons and Drew Dahl concluded in their study: “Was the Paycheck Protection Program effective?

“But it was poorly targeted, as almost three-quarters of its benefits went to unintended beneficiaries, including business owners, creditors and suppliers, rather than workers. Due to the income differences typical of these different constituencies, it also ended up being quite regressive compared to other major covid-19 relief programs, as it benefited higher-income households much more.

The forgivable loans went into effect April 3, 2020, a week after President Donald Trump signed the legislation and three weeks after declaring a national emergency.

PPP loans saved 2.97 million jobs per week in the second quarter of 2020 and 1.75 million per week in the fourth quarter of 2020, according to the Fed report citing a study published in the Journal of Economic Perspectives.

Of the nearly $800 billion in PPP loans, 90% had been canceled by June 2022, according to the study.

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