24 MULTIPLE PURPOSE RIVER DEVELOPMENT 



THE LABOR MARKET 



Inheritances, possession of income-earning assets acquired out of 

 past income, and other sources account for part of the aggregate 

 income of consimiers, but such problems as these can be taken up 

 more appropriately later in the treatment of the capital market. 

 It can be assumed, at this stage, that the consumer's income is 

 obtained exclusively in the form of wages and salaries in return 

 for work performed, and that the allocation of work in a market 

 economy is performed by the labor market. 



From a worker's point of view, the market provides given wage 

 rates for any occupation. A w^orker is assumed to be at liberty to 

 choose among occupations, balancing the costs and gains of each, 

 according to his personal circumstances. The size of his income 

 will depend on the number of hours he elects to work. The 

 number of hours worked, in tiun, is assinned to be determined by 

 the worker's maiginal valuation of his productive services and the 

 wage rate. The longer the hours worked during any period, the 

 greater becomes his marginal valuation of leisure. Thus, the 

 individual worker will be in his preferred work-leisure position 

 only when his marginal valuation of his productive services is 

 equal to the wage rate prevailing in the market. Hours worked 

 beyond that point are valued higher as leisure than the prevailing 

 wage rate, and therefore will not be undertaken. Hours worked 

 short of the equality between his marginal valuation and the wage 

 rate provide leisure which does not compensate him for the loss 

 of income. 



While the rates of hire in alternative occupations are given to 

 the individual, they are not fixed from the community's viewpoint. 

 That is, the productive services which the community of consumers 

 prefer to have performed, as revealed through their expenditures 

 for commodities, must be reconciled with the job preferences of 

 workers. These preferences in the aggregate, at so7ne structure of 

 relative wages amofig occupations, may not correspond to the 

 requirements of the community. From the community point of 

 view, however, there would be a constellation of wage rates for the 

 various occupations which would elicit exactly the amount of each 

 type of work that is preferred. This appears likely since, for any 

 worker with a given order of occupational preferences, there would 

 be a rate of hire for each alternative which would just induce him 

 to change occupations. Within any occupation, there would be 



