Incomes up and "official" poverty down for 2025. But costs were up, and it's definitely worse in 2026

Earlier this month, the US Census Bureau gave its annual updates for income and poverty in America for the previous year. On the income side, it looks like 2025 was a very good year, as inflation-adjusted incomes rose to a new record level.

In 2025, median household income was $87,460, an increase of 2.6 percent from the 2024 estimate of $85,210. Household income in 2025 was the highest on record dating back to 1967….

Median household income after accounting for taxes and credits increased by 3.1 percent, from $73,760 in 2024 to $76,060 in 2025.

As you can see, most demographics of American households gained vs inflation in 2025, but there is still a wide disparity of incomes among groups.

However, not everybody got ahead in 2025. This detail was notable to me, given that Trump won in 2024 in no small part due to bros of all races thinking that Mr. Businessman would help them get richer.

Among full-time, year-round workers, median earnings increased 3.2 percent for women but did not change significantly for men between 2024 and 2025.

For full-time, year-round workers, the female-to-male earnings ratio in 2025 increased to 83.9 percent from 80.6 percent in 2024.

In fact, men who worked full-time and year-round saw their inflation-adjusted earnings drop by 0.9%. Not enough for statistical significance, but an interesting decline in the face of women having those gains. Hispanic Americans (a group that heavily shifted toward Trump in 2024, allegedly on economic reasons) also saw earnings from their full-time job fall behind inflation last year.

Of course, many households are two-earner households, so that may help explain why overall household incomes went up by a rate close to those by women working full-time or we have a lot more people working multiple jobs. There are also other ways to earn income besides work, with those people seeming to be doing especially well in these Bubbly times.

Moving over to the poverty side, the lowest percentage of Americans were in poverty in decades, if you look at things from an income perspective.

In 2025, the official poverty rate fell 0.5 percentage points to 10.2 per cent, the third consecutive annual decline and one of the lowest rates on record (Figure 1). There were 34.5 million people in poverty in 2025.

So if poverty keeps declining and incomes were beating inflation in 2025, why did so many Americans not like the way things were going by the end of that year? The Census's Supplemental Poverty Measure (SPM) may fill in why.

Figure 4 presents SPM and official+ estimates from 2009 to 2025. The overall SPM rate (13.1 percent) was 2.9 percentage points higher than the official+ rate (10.2 percent) in 2025. In recent years, differences in how the poverty thresholds are adjusted explain part of this gap. While the official poverty thresholds are annually adjusted using the CPI-U, which includes a wide range of consumer expenditures, the SPM thresholds are based on a 5-year moving average of expenditures for a smaller bundle of goods, lagged by 1 year. When the cost of one or more of the components of the SPM bundle, such as food, outpaces overall inflation, it causes the SPM thresholds to increase more than if they were simply adjusted by the CPI-U or another inflation factor.

Notice how the SPM was lower than the official poverty rate for 2020 and 2021? That reflects the addition of items such as the expanded child tax credit, continuous Medicaid enrollment and other supports during the COVID pandemic. Then those supports went away in 2022 and beyond, while costs got higher, and this SPM chart helps explain why "affordability" is an issue that is overriding any increase in income for many Americans.

Let me also give you the footnote that explains the difference in the two cost-inflation bundles.

The CPI-U includes expenditures on food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services. The SPM bundle of goods includes food, clothing, shelter, utilities, telephone, and internet.

With food, shelter, and utilities being particularly inflated in the 2020s, it’s not surprising that the SPM is higher than the official poverty rate these days, especially for older Americans.

In 2025, the SPM rate for 18- to 64-year-olds was 12.3 percent, while the official+ rate was 9.2 percent. Those 65 years and older had the largest gap between measures (5.6 percentage points), with an SPM rate of 15.4 percent and an official+ rate of 9.8 percent. The larger gap among those 65 years and older was primarily due to differences in the treatment of medical expenses between the two measures—medical expenses are subtracted from resources in the SPM but are not accounted for in the official poverty measure.

Then realize that 2025 was the last year before the expanded tax credits for Obamacare policies were taken away, causing sizable increases for many Americans in their health care premiums and out-of-pocket costs. Combine that with higher inflation without higher wages in this year, and it seems likely that 2026’s SPM poverty measure will be the highest in nearly a decade.

2025 wasn’t great in general, but for a lot of Americans, it might be the best we get for a few years when it came to incomes and making ends meet. And if that’s true, I sure wouldn’t want to be running for office as a member of the Republican Party that cut health care supports and supported policies that led to price hikes, leading a lot of Americans to believe things are significantly worse than they were in the Fall of 2024.