Depends on their prospects.

For example right this moment, if my employer pulled this on me with a 10% pay cut, it’s probably still better than my prospects in the open market at this moment. I would normally have a pretty strong network of connections, but at the moment they are all in hiring freezes, so I’d probably have to take a huge pay cut to find a job.

But you would be sure I’d be heavily watching my chances and leave as soon as I had a competitive offer on the table.