An evaluation of the Paycheck Protection Program using administrative payroll microdata

Area of Science:

• Economics
• Public Policy
• Labor Market Studies

Background:

• The Paycheck Protection Program (PPP) was a key fiscal stimulus during the COVID-19 economic shock.
• It aimed to help small businesses maintain employment and wages amidst the crisis.
• Eligibility for PPP was based on industry-specific firm-size cutoffs.

Purpose of the Study:

• To estimate the causal effect of the PPP on employment at eligible firms.
• To compare employment trends in PPP-eligible versus PPP-ineligible firms.
• To quantify the impact of the PPP on job retention and wages.

Main Methods:

• Utilized high-frequency administrative payroll data from ADP, a major payroll processor.
• Employed a comparative analysis of PPP-eligible and PPP-ineligible firms.
• Estimated the causal impact on employment evolution over time.

Main Results:

• The PPP led to a peak employment boost of 2% to 5% at eligible firms by mid-May 2020.
• This employment boost decreased to between 0% and 3% by the end of 2020.
• An estimated 3.6 million jobs were retained by mid-May 2020 and 1.4 million by year-end due to PPP.

Conclusions:

• The PPP demonstrated a significant, albeit temporary, positive impact on small business employment.
• The program played a crucial role in mitigating job losses during the pandemic.
• The cost per job retained was substantial, ranging from 3.4 to 5.2 times median earnings.