The amount a flagger gets paid has nothing to do with the government, it's all union negotiated wages, and almost everyone working on road projects is a contractor except pothole patrol, everyday maintenance (grading, plowing) and a few paving projects maybe. The only gov't employee on the project is an inspector and sometimes the surveyors. So, what really "wastes money" is the unions that the private sector workers work for. That being said, I can see why highway workers get paid so much.
Having worked on the roads for 3 months now, I've realized that at least 50% of drivers are mentally retarded. I've almost gotten killed no less than 3 times in that short amount of time by people speeding/not using common sense or following traffic control.