And I don't think you are understanding what I am saying. In order to combat deflation companies would either need to adjust your pay, (pay you less every year) or fire you and hire someone new for less money.
Right. If you're rational, they'll do the former. If you're irrational, they'll do the latter. It is the same as inflation but in reverse. An irrational employer who refuses to raise wages to combat inflation will lose employees. A rational one will raise wages.
If you read my original question I give the example of, if someone pays you 10 bucks an hour and inflation hits at 10% a year. Why, in 10 years time, wouldn't your employer fire you and hire 10 other people at 1 dollar an hour?
Because he couldn't afford to. If he can't afford to hire 10 employees at market rates today, why would you think he would magically be able and willing to do so in 10 years?
The only other option for the employer that I can think of is it would be common place to pass out a standard of living adjustment and pay you less every year. That or labor would start to get underpaid in order to counter act deflation and keep employees. Either way it doesn't promote employment longevity and job stability. It seems to be the same problem as inflation just in reverse.
It's precisely the same problem, which is why it's no problem at all. You can make the same argument about inflation -- employees constantly demanding raises will piss off employers and hurt employment longevity and job stability. But that's obviously not true. It really makes no difference.