Are You Part of an Elite, and Don't Know It?   (July 21, 2008)

When we speak of Elites, we usually mean elites of concentrated financial assets/power, as depicted in this chart:

With vast financial resources comes political power, whatever health can be purchased, and various other pleasures unavailable to mere mortals. Being one of the top 1% owners of U.S. assets is certainly an elite status, one that is visible and well-known.

But amongst us regular folk, there are many other elites. By definition, an elite is a minority with some advantages unavailable to the majority. Some of my definitions of elites may surprise you, for you may have been unaware that you are a member of an elite.

Elite #1: government employees with robust pensions and medical benefits. I just returned from a large family gathering and was struck yet again by the great divide between the many cousins employed by government (firefighter, police officer, librarian, teacher, state bureaucrat, congressional aide, etc.) and "the rest of us".

"The rest of us"--even the attorneys among us--do not have equivalent pensions and lifetime healthcare benefits. As healthcare costs skyrocket, public unions have maintained their grip on public finances, while private industry has been free to (or forced to) shed benefits left and right. Many in private employment have been reduced to "ghost benefits"--benefits which are designed to never kick in or which are so circumscribed that they are essentially worthless window-dressing.

For example: huge deductables, limited coverage of family members, and so on.

I have long predicted Battle Royale between the taxpaying public and the public employee unions over the crushing costs of maintaining gold-plated pensions and medical care benefits. To take but one recent entry: Public Employee Pension Greed and the Gutting of Downtowns (February 7, 2007)

If you work for a government agency or school board, you may not feel like an elite, but you are. I have friends who have retired from city libraries and school boards with not even 20 years of service. Please locate a private-sector job which enables you to retire with a handsome pension/benefit package at 55 with less than 15 years service.

"The rest of us" are simply clinging on, hoping to make it to 63 and 65, and hoping there will be some Medicare and Social Security benefits left as this nation enters insolvency on every level.

According to the Bureau of Labor Statistics, there are 22 million government jobs and 150 million private-sector jobs (138 million hourly/salaried and 12 million self-employed). As the recession deepens globally, unemployment will skyrocket in the private sector and whatever healthcare benefits and 401K pension contributions remain will be subject to a slash-and-burn utterly unknown to public employees--at least for now.

Meanwhile, back at the self-employment ranch, we self-employed are seeing our healthcare premiums jump by 10-20% each and every year even as what's covered shrinks like a puddle on hot summer asphalt. Dental? No way. Eyecare--are you kidding? Office/clinic visit? $50 co-pay, pal. Drug coverage? It's called "cash," buddy. Drug coverage is zip, zero, nada. And this "coverage" costs $750/month and up.

Elite #2: Natural good health. For this elite, the cliche is "50 is the new 30," meaning that for those with good health, middle-age has extended far beyond the previous boundary of "old age"--50 or 55 years of age.

Some recent reader email alerted me to the incredible value of this elite: excellent health. Some people just have extraordinarily robust genes, while the rest of us carry a burden of weaknesses/flaws beyond whatever damage we do to ourselves with unhealthy lifestyles.

For those with poor genes and poor healthcare, as one reader recently put it, "30 is the new 50." For those blessed with natural health and a non-hazardous job, then healthcare really isn't a big factor. We all know people who have never been in the hospital and who die at the end of a long life after a short illness. But for others with chronic/incurable ailments/conditions, then life is a struggle. Lack of healthcare makes this struggle much, much more arduous and life-threatening.

Elite #3: family money. By this I don't mean tens of millions, I mean much more modest means--but means nonetheless. For example, one of my second cousins has been living rent-free in her grandfather's second home while she finished college. Since it's a block from a nice beach, that's more or less a gift of at least $30,000. Since the house has been in the family for decades, it's one of the 25 million homes in the U.S. which is owned "free and clear," i.e. no mortgage. And with Prop 13 in force in California, the property tax on the property is absurdly modest compared with its recently purchased neighbors.

So while the "gift" of free rent didn't cost the elder generation anywhere near its cash value of $30,000+, that cash value was substantial. The young person got to save $25,000 which she can then use for fun stuff like travel--fun stuff which a person without access to family means would have a much harder time saving up for.

The benefits of family money go on and on: a down payment loaned by a relative, the use of a vacation cabin/home, airfare paid by Grandma, the first car given to a young graduate for free, etc. Others are handed the family business--a business which already has assets, income, customers, etc., all the elements which a new entreprenuer has to sweat blood to build--if they succeed. The vast majority of new businesses fail within a few years.

All of this is considered "normal" in many middle-class families, but to those without these extended-family assets, it is anything but normal. Believe me, saving up to buy property without family help is a long, slow, arduous slog which requires years of consistent scrimping and saving--and I don't mean $100 a month or what passes for "savings" nowadays--I mean 50+% of your take-home earnings, each and every month for years on end. And ditto for paying off student loans, auto loans, and all the other costs which those without family support have to pay themselves.

Elite #4: the Remnant. I covered The Remnant, the Pareto Principle and You (June 25, 2008) last month, and here I am using The Remnant as shorthand for that minority of people who have pondered the future and then made plans to improve the odds of their survival and increase their well-being and security. Unlike most elites, membership in this elite is self-selected.

There are many other elites, I'm sure, and no doubt I missed some important ones....

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