If decreasing prices (deflation) are caused by increasing productivity, then the average worker will deserve the increasing purchasing power his fixed salary provides, and he will never need an actual raise or a pay cut (as long as he remains exactly average).
Right, but the real question here is what happens if deflation is caused by scarcity of currency occurring at a rate that's likely to exceed any increase in real value elsewhere. And the answer is, so long as this deflation isn't terribly unpredictable, nothing much will happen.