Stand up for the facts!
Misinformation isn't going away just because it's a new year. Support trusted, factual information with a tax deductible contribution to PolitiFact.
I would like to contribute
If Your Time is short
The Paycheck Protection Program distributed $521 billion in loans supporting more than 51 million jobs, averaging out to about $10,200 per employee
Johnson uses a different method to get his data, but it is in line with what PPP data shows
Other factors, such as how much money businesses put toward payroll, can alter that figure
How much money does the government’s Paycheck Protection Program provide for each employee?
That’s the focus of a recent claim by U.S. Sen. Ron Johnson.
In a July 1, 2020, interview with Axios, the Wisconsin Republican discussed his proposed changes to the PPP, which was part of an effort to protect the economy from the effects of coronavirus. But he also added a statement that may have had listeners seeing dollar signs:
"PPP on average probably provided a grant of around $11,000 per employee," he said.
Let’s take a closer look at that figure.
The PPP is a $650 billion program intended to keep small businesses afloat during the coronavirus pandemic by providing them money — primarily used to pay workers.
The U.S. Small Business Administration distributed more than $521 billion through the program as of June 30, 2020, according to a report released July 6, 2020. Roughly $131 billion set aside for the program remains undistributed.
The PPP money is distributed as loans that can be fully forgiven if the money is used for payroll costs, interest on mortgages, rent and utilities. The loans are subject to various requirements, such as that businesses use at least 60% for payroll. That number was reduced from the previous requirement of 75%.
(Johnson in his claim referred to the PPP loans as "a grant." He mentioned this in a May 21, 2020 op-ed in the Wall Street Journal, saying forgivable loans are "essentially federal grants.")
Businesses originally had just eight weeks to spend the loans, but that period was increased to 24 weeks in early June.
The loans are intended for small businesses, which are generally defined as those with fewer than 500 employees.
The $521 billion in loans supported 51 million jobs as of the end of June, according to the July SBA report. That translates to about $10,200 per employee — but that assumes 100% of the money went directly to employee payroll, which is not the case.
For instance, if every company put just 60% of its loan toward payroll — the minimum required for the loan to be forgiven — that would average out to just over $6,000 per employee.
When asked to back the claim of $11,000 per employee, Johnson spokesperson Aaren Johnson used a different method.
Aaren Johnson used the private-sector employer’s average cost for employee compensation from December 2019 from the Bureau of Labor Statistics, calculated that for a full work week and put that number in the context of an eight-week period, the original period of time the loans were meant to cover.
Using these metrics, the average loan per employee was around $11,110.
Aaren Johnson emphasized the senator’s comment was made in the context of his proposal for a PPP replacement program, which included a federal grant of $10,000 per employee to businesses.
He added the senator "was talking about the payroll-covering part of the PPP forgivable loan" when he made his statement.
Kevin Mumford, a professor of economics at Purdue University, said Johnson’s method of calculation is "reasonable as a rough approximation" of the average loan per employee.
Mumford noted the average amount of money per employee would vary by business depending on the percentage of the loan businesses put toward payroll and benefits.
John Witte, professor emeritus of public affairs and political science at the University of Wisconsin, also said Johnson’s method was accurate without immediate access to detailed tax data from the businesses.
Witte added it was "correct" to use the average employer cost for employee compensation from December 2019, because that was before the coronavirus pandemic ravaged the U.S. economy, altering those payment figures.
The Bureau of Labor Statistics report for March 2020 showed a slightly higher average cost of employee compensation than the December 2019 figure. Had Sen. Johnson used that figure, his average loan per employee would have been around $12,000.
Sen. Johnson said the "PPP on average probably provided a grant of around $11,000 per employee."
Although the methodology used to calculate this figure is an approximation due to lack of access to detailed tax information, it largely aligns with the $10,200 average the PPP data shows. But both figures assume businesses are applying 100% of the loans toward payroll, which is not always the case.
Our definition of Mostly True is "the statement is accurate but needs clarification or additional information."
That fits here.
Axios, Watch: Small business recovery during the pandemic, July 1, 2020
U.S. Small Business Administration, Paycheck Protection Program (PPP) Report, July 6, 2020
U.S. Small Business Administration, Paycheck Protection Program, Accessed July 7, 2020
PolitiFact, Biden uses arbitrary, conflicting definition to slam small business loans, May 26, 2020
U.S. Chamber of Commerce, Small Business Coronavirus Impact Poll, June 3, 2020
Email exchange with Aaren Johnson, spokesperson for Ron Johnson, July 7, 2020
Email exchange with Kevin Mumford, associate professor of economics, Purdue University, July 14, 2020
Email exchange with Charlie Trevor, professor of management and human resources, University of Wisconsin-Madison, July 8, 2020
Email exchange with John Witte, professor emeritus of political science and public affairs, University of Wisconsin, July 13, 2020
The New York Times, Lobbyists, Law Firms and Trade Groups Took Small-Business Loans, July 6, 2020
Bureau of Labor Statistics, Employer Costs for Employee Compensation, December 2019
Bureau of Labor Statistics, Employer Costs for Employee Compensation — March 2020, June 18, 2020
Wall Street Journal, How to Fix the Paycheck Protection Program, May 31, 2020
Wall Street Journal, PPP Loans: What You Need to Know About the Latest Changes. July 6, 2020
Wall Street Journal, Major Fixes Made to Small-Business Loan Program, June 5, 2020
Read About Our Process
In a world of wild talk and fake news, help us stand up for the facts.