The instant that offer was made, any sensible person will start looking for another job. The only people who will stay are the ones who can’t get hired elsewhere. You’ll lose your best people and keep the worst.

Layoffs are very tricky because just the act of laying people off can trigger good employees who remain to start looking elsewhere. It can trigger a sort of evaporative cooling of your whole workforce. A strategy of offering reduced pay instead of being laid off would exacerbate it.