In times of hardship, it becomes tempting to shift a problem onto someone else; the legislation that came out of the Covid-19 pandemic demonstrated this exact tendency. In response to the economic disruption caused by Covid-19, Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Paycheck Protection Program (“PPP”) is section 1102 of the CARES Act. It aims to provide relief to small businesses in the form of a loan that can be forgiven by spending loan funds on certain types of business expenses. Although the CARES Act provides unemployment benefits, the PPP is also positioned to act as an unemployment office. By heavily emphasizing a business’s requirement to spend on payroll costs to obtain loan forgiveness (no matter the need, or lack thereof, for labor), the government essentially pushes the unemployment problem away from itself, and forces struggling small business owners to deal with it instead.
At first glance, it might seem like the PPP both supports small businesses and fights unemployment by keeping people working, as opposed to paying out extra benefits. However, this structure has proved to be unhelpfully rigid, and too inflexible to allow the PPP funds to be truly useful to business owners. So why structure the PPP this way? The answer may be due to more than haste in passing the law: the true problem may be deservingness judgments driving the policy.
The Unemployment Problem and the Focus on Work
The PPP overemphasizes work, which has caused problems for small business owners. For example, businesses must spend 60 percent of their PPP funds on payroll costs to have the loan forgiven. Further, there are only five categories of expenses that businesses may spend the loan on, including payroll costs. Out of all possible expenses that a business in any industry could incur, they are expected to spend 60 percent of their PPP funds on payroll, regardless of whether they have a need to spend much on labor. This overemphasis on work suggests that the primary goal of the PPP is to address unemployment, while providing actual business relief is merely secondary.
Although businesses are pressured to keep workers employed through the PPP payroll requirement, another section of the CARES Act specifically provides unemployment assistance. Under Section 2104, individuals receiving unemployment compensation from the state now also receive an extra $600 from the federal government. While many businesses looked to the PPP as a way to save their business from death via pandemic-induced economic pandemonium, they are expected to act as an unemployment office for their workers, despite this provision in the CARES Act that provides additional unemployment support. Some may argue that the PPP merely incentivizes businesses to retain employees by rewarding them with loan forgiveness for doing so. However, when the structure of the PPP is not useful to the companies that need it, this “incentive” feels more like an extra responsibility.
Potential Root of the Problem: Deservingness Judgments
The PPP’s overemphasis on work can be traced to deservingness judgments. Deservingness judgments are the value judgments and assumptions we make when deciding whether to give assistance to someone else. On a small scale, deservingness judgments might include deciding not to give money to a homeless person, because you think they will spend it on alcohol or drugs. On a large scale, deservingness judgments might look like welfare programs that require paid-in contributions to receive benefits. Our deservingness judgments may be influenced by a variety of factors, including history, culture, political ideology, and even psychology.
Some notable foundations of deservingness judgments in the United States are Puritan values and the Protestant Work Ethic. The Protestant Work Ethic equates hard work with morality, because hard work was seen as a harbinger of eternal salvation. As such, hard work was equated with moral goodness, and laziness was associated with immorality. The Protestant Work Ethic can be seen in other welfare policies: for example, the programs in President Johnson’s War on Poverty focused on education and skills training to help people get jobs rather than providing financial assistance. The focus was on “hand ups,” and not “handouts.”
The PPP’s overemphasis on work embodies this Puritan idea that working is morally good, and this desire to emphasize work in the PPP can be seen in its other failings. When thinking about unemployment in the context of Puritan Values, it is easier to understand why the PPP was written to address unemployment through businesses: businesses who help keep people working for their pay (the “moral” solution, contrasted to rewarding “laziness” with handouts) deserve the assistance of the PPP funds.
Why It Matters
Shifting the unemployment problem onto businesses through the PPP problems when it is supposed to be solving them. For example, some businesses bemoan that they are being strongarmed into spending so much on labor costs when the actual need for labor is diminished due to stay-at-home orders and social distancing requirements. Other businesses cannot pay enough to compete with increased Covid-19 unemployment benefits. And while these small businesses are being strongarmed into spending more on payroll costs, their ability to spend on other necessary expenses is greatly reduced.
Allowing deservingness judgments to drive economic relief policies leads to injustice: in the case of the PPP, this injustice was felt by the millions of business owners who were not provided adequate relief, and were forced to close permanently. One bowling alley owner in Michigan wrote a heartfelt eulogy on Facebook about his dying business, mourning the work he put into it, and its place in the community for over seventeen years. The PPP is not the first economic assistance policy that created injustices for those it intended to serve, and unless we re-think and address the prevalence of deservingness judgments in these economic relief policies, it likely will not be the last.