In many developed countries, real wage growth has lagged behind labour productivity growth in recent decades. This column uses data from Japan and Korea to study the relationship between labour productivity growth, real wage growth, and labour’s terms of trade, defined as the ratio of the consumer price index to the GDP deflator. It shows that the main reason for the real wage-labour productivity growth gap is a large decline in labour’s terms of trade. Raising real wages in the future will require policies to support the business environment and develop high value-added sectors.