The Workers' Party (WP) has proposed a scheme to give workers who have been laid off 40 per cent of their last-drawn salary for up to six months.

The money would come from a proposed fund into which employers and employees each contribute 0.05 per cent of monthly salaries, the WP said in an online paper.

This would work out to a contribution of about $1.90 by each worker and employer, based on the average wage in 2014, it added.

Based on local manpower figures and an assumed administrative cost of $10 million, the scheme would have a yearly surplus, with no need for government top-ups, the WP said.

The Government has rejected previous calls for unemployment insurance. Prime Minister Lee Hsien Loong said in May that Singapore has "something even better".

The Government - not workers or employers - funds programmes to support workers who are making an effort to get back to work and upgrade their skills, he said.

Countries with benefits for retrenched workers include Argentina and Denmark. In France, where unemployment is stubbornly high, workers contribute about 2 per cent of their salary - and employers, 4 per cent - to such benefits.

Economists said that job seekers would have more time to find a suitable job, but the scheme could also lead to higher unemployment.

National University of Singapore associate professor of economics Liu Haoming said companies would find it harder to fill vacancies as out-of-work Singaporeans could take their time getting a job.

The WP said that to continue receiving payouts after the first month, workers must sign a declaration saying they are actively looking for a job. Declarations would be periodically audited, with penalties for false ones, it added.

SIM University economist Walter Theseira said there are already schemes to help those in need. "We have to understand what problem unemployment insurance is meant to solve," he said.

"If the problem is subsistence for low-income households, unemployment insurance isn't necessary because we have a framework of providing them cash assistance, although we can debate whether that assistance is enough.

"If it's giving people a buffer between jobs, is unemployment insurance the best way, or should we encourage people to set aside their own savings?"