I believe the reason this was implemented was to prevent sub 25 man kds from abusing the kingdom explore pool. Now that explore pools are individual, there's no reason that I can see for there to be a penalty for not wanting randoms to join your kingdom.
If there is a reason for it that I'm not seeing, at least make it a sliding scale up to 20% wage increase. For example, make each "missing" province be a 2% wages increase. Kingdoms with 21 provinces have a 2% wage increase, 20 provinces have 4% increase, etc up to the cap of 20% on kingdoms with 12 or less provinces.