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Theoretical calculations are presented showing the relationship between the internal laser absorption and structural parameters appropriate for CW room-temperature lasers. These diodes have submicron-thick recombination regions, and very small spacings between the heat sink and the recombination region to minimize the thermal resistance. The optical loss is shown to be strongly dependent on the degree of radiation confinement to the active region. In particular, absorption in the surface GaAs layer providing the ohmic contact becomes very significant when the intermediate (AlGa)As layer is reduced below about 1 μm. It is further shown that excessive penetration into the GaAs regions gives rise to anomalies in the far-field radiation profiles in the direction perpendicular to the junction plane. Proper design of the internal structure of the laser avoids large increases of the threshold current density as well as large decreases in the external differential quantum efficiency from interaction with the contact layer. The design curves presented can be used to predict the gain required at threshold for a broad range of structural parameters of interest in low-threshold laser design.