It decreases seating less than you might expect. Seating on an aircraft is usually limited by the number of emergency exits rather than actual dimensions.
I could see that being the case for pitch, maybe (though much further reductions than some airlines have done seems likely to cause medical issues for tall people). But width? The only place for that to come from is from the aisles and typical 3-3 or 2-4-2 layouts don't leave very big aisles (and the results would not be navigable for anyone using that extra seat width)