User blog comment:ChishioKunrin/The Schnee Dust Company's treatment of Faunus workers/@comment-25368963-20150118051529/@comment-3146930-20150118150550

It may not be as simple as that. The project itself was their first real attempt at expansion beyond the main city. For all we know the company hired to build it may have offered the works some pretty serious benefits when they finished. I'm sure a few Hunters were there for protection as well, which would give the workers some peace of mind. Even if building on the surface failed, they seem to have gotten pretty far into the process of building the underground city with no interruptions. It wasn't until they tried expanding more into the caves that they ran into a fatal problem.

I would say they died not from stupidity, but more out of human ambition. Plus if they were taking the risk of setting up a city so far from the main city, it may be because they were forced to expand. Vale may only be able to hold so many people until they hit over-population problems. Oobleck only says MG was the first expansion attempt so Vale probably expanded later on, but with more precautions in place to not repeat MG.