Look at it this way... your boss most likely can't afford the airplane. It's as simple as that. Start looking elsewhere, and leave with dignity on your terms if you can.

If he approaches you with a pay cut, then it's your decision on whether to accept it or not. However, you know you'll leave as soon as something better comes up.... and you should if he's treating you this way.

Another option would be to preempt him and ask for a sit-down. Then ask him openly... you understand that he is looking for a cheaper pilot and ask him if that's the case. The most important thing is that you don't want to do it in a hostile manner, but rather with a salesman's pitch. You are in effect selling your services as a pilot. What makes you worth more than some other hack he's considering hiring? Who knows... he may let you go right then and there, or you may make a good enough sales pitch to keep your job and have your boss realize what he's paying for.

However, to protect yourself, I'd start looking right away for another job, and when you get it... give plenty of notice. This industry is WAY too small... trust me on it.