Veteran economist Lim Chong Yah has called on the National Wages Council (NWC) to consider requiring employers to increase their Central Provident Fund (CPF) contributions for low-wage workers.

This, rather than a national minimum wage, could be used to raise pay across the board for the low-income earners, said the academic who two years ago had proposed "shock therapy" to raise wages at the bottom and freeze those at the very top to reduce the income gap.

Speaking at the launch of his book on the NWC's history, Prof Lim recalled that when the council wanted a nation-wide implementation of its recommendations to increase or cut wages previously, it incorporated such a compulsory element.

This was usually a mandatory CPF increase or cut. Asked by reporters what quantum rise he would suggest, the NWC's founding chairman from 1972 to 2001 said a 5 per cent increase would be a good figure, but added "it is better to be debated among NWC".

The CPF employer contribution rate for low-wage workers was restored to its full level at the start of the year, and ranges from 6.5 to 16 per cent depending on the worker's age.

Prof Lim also urged the council's leadership to raise the mandatory retirement age from 62 to "65 and above" to increase the local labour supply during labour shortages, such as what Singapore is experiencing now.

The labour market has been tight, with unemployment low and the foreign worker inflow tightened. Currently, workers may be re-employed from the age of 62 to 65.

His suggestions for the NWC come a week after Deputy Prime Minister Tharman Shanmugaratnam announced a move that will boost the monthly wages of 55,000 local cleaners to at least $1,000, up from $850 now, through a tiered-wage system.

It will eventually be adopted for the security sector too.

DPM Tharman said this is a "targeted approach, not a national minimum wage".

Prof Lim, an emeritus professor at the National University of Singapore and Nanyang Technological University (NTU), called it an innovative move, and said there should be time given to gauge its impact.

But he pointed out that this approach has limitations as it appears to cover only the workers of cleaning companies, and not cleaners who may be hired through other avenues.

He also warned that this sectoral approach should not lead to a "multiplication of minimum wages", citing the case of Mauritius, which ended up with 460 different minimum wages, "creating a lot of immobility and management problems".

Prof Lim added that he still stands by his "shock therapy" proposal - a three-year plan to lift the pay of all workers earning below $1,500 by between 15 and 20 per cent, and freeze the pay of those earning more than $1 million.

NTU Professor of Economics Chew Soon Beng supports the raising of CPF rates.

He said: "More money in CPF will eventually go into CPF Life in one form or another. Another reason is that should we have another recession, which is likely because the business cycle is so short, then we can lower it."

Temasek Holdings chairman and former labour chief Lim Boon Heng, who was at the book launch at the National Library, said any CPF increase needs to be considered carefully because "you don't want to increase the cost of hiring".

He is in favour of raising the retirement age to 70, but says the current re-employment approach allows for flexibility.

Prof Lim's book, which was launched by former president SR Nathan and titled Singapore's National Wages Council - An Insider's View, is published by World Scientific.

It documents key events in the NWC's history through letters, speeches and lectures by Prof Lim.