Short Fiction dying because the pay isn't good enough?

Scalzi asks whether the "classic science fiction short story market is dying because in 2007, six cents a word is simply not enough to keep it alive".

I assume that no one expects to make a living out of short fiction these days? Most people seem to view it as a stepping stone to novels (and then return when they can afford to and big magazines want them). However if magazines payed loads of money, what would happen? Would the quality go up? I'm not convinced it would, but I bet the slush piles would get bigger.