An article in the Economist discussing the 2007-2009 recession states that "employers found it difficult to reduce the cash value of the wages paid to their staff. (Foisting a pay cut on your entire workforce hardly boosts morale.)"
a. During a recession, couldn't firms reduce their labor costs by the same, or possibly more, if they laid off fewer workers while cutting wages? Why did few firms use this approach?
b. What does the article mean by firms reducing the "cash value" of workers' wages? Is it possible for firms to reduce workers' wages over time without reducing their cash value? Briefly explain.