Why do firms losing money almost always reduce labor costs via layoffs instead of pay cuts?
At least in the United States, firms seem to almost always reduce labor costs via layoffs rather than pay cuts. Pay cuts are so rare that they're literally [headline](https://money.cnn.com/2009/01/07/news/economy/salary_cuts/index.htm?postversion=2009010811) [news](https://content.time.com/time/subscriber/article/0,33009,1891748,00.html). From an economic standpoint, if workers are being paid more than their marginal product, then either solution fixes the problem - layoffs boost marginal product to match the old wage, while pay cuts lower the wage to match the new marginal product.But it seems to me that a pay cut is better for both the employer and the employee. From the employer's side, when times get better they don't need to bring in a bunch of inexperienced new employees to replace the ones they laid off. From the employee's side, they still make some money rather than no money, and they are free to leave the company if they can find sufficiently higher pay at another firm to compensate for the inconvenience of switching jobs. Personally, I would always prefer to be offered a pay cut than laid off, and apparently over [90% of workers feel the same way](https://hrdailyadvisor.blr.com/2012/02/26/layoff-furlough-pay-cut-which-is-best/). So why are layoffs so ubiquitous?
Typically, firms are reluctant to lay off as they are to hire. the first thing they do is adjust hour (add or eliminate overtime). Hiring and laying off is costly. Second there are a lot of contracts in place. Particularly when their are unions involved which forms a wage rigidity. Finally if there are only a few firms It may appear that firms are "exploiting workers" by demanding wage concessions. Right now we see a lot of firms engaging in "profit sharing" which, de facto has wages rising in good times and falling in bad reducing the amount of layoffs which would otherwise have taken lace.
