Public debate on the right level of wage demands is vigorous in Germany. Employers usually argue that too high demands will cost jobs, while unions argue that higher wages are needed to stimulate demand. Thus, the scope available for wage increases that will not lead to cuts in jobs needs to be determined to evaluate whether wage demands are actually too high or not. This paper shows some possible ways of deriving that scope of allocation and at the same time tests these in a multi-country comparison. The conclusion is that small changes in the derivation lead to large changes in the outcome in terms of the multi-country comparison. It is not possible to derive a unique procedure to classify a wage policy as employment enhancing or restricting using the scope of allocation since a different but equally valid derivation might lead to an opposite conclusion.
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