One of the local cities is in a bit of a deadlock with its employees. The employees are underpaid, and the city claims it's broke. An independent arbitrator recommended the city shut up and give its employees a 12.5% raise. Twelve and a half percent annual increase. That's, frankly, unheard-of; but it might actually increase the wages' purchasing power to what it used to be.
See, the official measure of inflation leaves out a lot of things that have gone up a lot faster. Stuff like medical care (a lion I don't care to poke with a stick right now) and the price of housing. So while there may have been so-called "cost of living" increases (although that's by no means certain), they won't have kept pace with the actual cost of living, based as they are on a bogus measure. So the purchasing power of the city employees' wages has declined.
And what do people do when they have less purchasing power? Even in the days of doing everything on credit and hang the future, they buy less stuff. This means less sales tax for the city, which puts a hole in the budget, leading to no pay increases, and so reduced purchasing power and oh look, we have a vicious cycle because people are scared of shared deficits (personal deficits, they're fine with, but try sharing them and people will scream bloody murder) and so the public sector employees are acting as a drag on the economy.
Now, if you increase a typical working stiff's take-home, what's he going to do? Dollars to donuts he'll buy a huge television, and boy howdy does that carry some sales tax. Then he'll buy a blu-ray player, some games consoles, a whole bunch of movies in HD, and he'll re-up his cable which also feeds revenue to the city. And suddenly, by increasing your workers' wages, you've made a massive increase in your revenue, and you can afford the increased wages. It is impossible to cut your way to prosperity. It's been tried, over and over, and it has completely failed on every occasion.
So while 12.5% may be taking the piss, a pay freeze is one of the worst ideas around for recessions. It makes the recession last longer, because the economy is driven by consumer demand. And when there's no slack in the consumers' budgets, they don't provide that demand, and we have a stagnant economy. All of this is simple logic...