When employers contract their payroll, they do so with layoffs rather than pay cuts. The reasons for this are fairly complex, but if we take this as a given it

When employers contract their payroll, they do so with layoffs rather than pay cuts. The reasons for this are fairly complex, but if we take this as a given it implies a lot about our monetary policy. Specifically, it argues for something like NGDP targeting, so that employers as a whole continue to have enough money to avoid layoffs even as total real wages decline.