No, seriously, why do they? It's not like the construction workers don't get paid their wages if they aren't given such projects, and, unless you are buying the resources from overseas, the only cost for the construction materials for the state is wages/salaries of the workers who are involved in the relevant processes.
Am I being swindled?
Unless we are dealing with a city-state, a part of that supply chain can be situated in other cities/areas of the country. Apparently, though, we are dealing with a city-state (with no prior city), according to the responses that I am getting.
Except no (as in, not generally)? The workers get paid regardless of whether or not they are assigned on projects, and they use the money to buy goods and services from the state. What is the significance of paying them specifically with goods in this context?
Yes, you basically play as a city state. The whole premise of the game is that you are developing an independent 24x24 km square republic with no modern industry. Maybe that's not realistic, but neither are a bunch of other things in the game.