In a free market people don't exchange something of lessor value for something of greater value.
Sure they do, specifically people sell their time for less than they think it is worth (and are often deeply unhappy about it) and necessarily for less than it is worth to their employer. Realistically there's not much choice as to whether we work or not and even if it's an exchange which is formally free. The situation is not symmetrical with our other decisions where our freedom to exchange (or not to) may be more real.
If I hire you do a job, I do so because I value the "work" less [more?] than my money....
Yes and when I hire people for a job (eg. the plumber yesterday) I do so on the same basis. However, this is because my income is not dependent on exploiting the difference in the cost of labour and its value.
If my income were dependent on hiring workers to generate value I could only afford to pay them more than the value they add to my business if my products could fetch a price above their value. However since people making consumption decisions are far freer than people selling their labour I will have to rely on paying my workforce less than the value they add. (Which is mellon's point).
As I keep reminding my teenage kid ... "now son, are you working hard enough? Remember if you are not making more for them than the $20/hr they are paying you, they are not going to be able to keep you on!"