I'm not sure I agree with this, although I see the logic and I've probably said similar myself in the past.
I think you risk the system becoming too small. it's already too small actually. I think having 100 full-time professionals really is the lower limit an international side can sustain. It's a regular occurence this past season that franchises have had to field 2nd or even at times 3rd string players due to the national side/A side having fixtures - it's not good when those fringe players coming into First Class fixtures are basically random amateurs. The drop-off in standard is vast, and doesn't benefit anyone. I think 20 players in a franchise squad is reasonable when you consider probably up to 5 or 6 of those per side may be unavailable at any time due to internationals.
You have to give enough opportunity to those on the next rung down who may be young enough or talented enough to maybe at least become decent franchise players long-term. I think it's dangerous if your focus is entirely only on players who have the potential to play international cricket. You also need a solid core of competitive players who honestly won't ever play for the national side but can ensure decent standard, week in week out over years in the Logan Cup.
Of course the key thing is that if someone is contracted then they have to be seriously contracted. There needs to be a strong expectation that anyone on any sort of contract is a full-time professional and that this is being monitored and strictly adhered to. You can't have these fringe guys going 4 weeks without being selected in the team but only training maybe two or three times, half-heartedly in the local nets. If you're going to have a professional contract then there has to be an absolutely expectation and high-standards and requirements to match.