Johnson accurate in his estimation of PPP loan per employee

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.

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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.