The Great Depression of the the 1930s could also be thought of as the Great Deflation. The wage level drops simply because demand is down and there is high unemployment. Those left with a job do OK becuase prices may fall even faster than the wage level (which is what happened in the 1930s).
During the Great Depression even some public service wages fell.
The other thing to consider is the wealth effect on consumption. With less wealth, people spend less and demand falls more. Wealth in the form of assets can to an extent be thought of foregone past consumption which can be accessed in the future. What deflation does is to massively devalue the assets that could be converted into consumption. It can become a downward spiral as assets are sold off to meet basic consumption by the unemployed.
