The issue is that most towns have by-laws and may be even a state law I'm not sure about the latter, but I know my town has a by-law that only police & fire can direct traffic on a public way, so this negates the ability for a private citizen or construction worker from doing so in a manner in which you speak.There is no need for a police officer to direct traffic. Nor is there any need to pay $30/hr. It doesn't take much training or skill to be able to direct traffic around a construction site.
The flag-men law is a state law and therefore superceeds any town by-law, but it does have exceptions such as speed limit and traffic flow that kicks it back to a police detail, these are reasons why we don't actually see many flag men out there...