The fairies still have to pay for their magic. They are only given so much fairy dust per year, which means they can’t be wasteful with it. It’s also my belief that leaders of the fairies & the dwarves have a sort of quid-pro-quo deal in place. The head dwarf promises to spread propaganda about how dwarves don’t [can’t] fall in love to prevent the other dwarves from wanting to leave the mines.
I mean, isn’t it odd that only ‘Grumpy’ seemed to question their ideas on work. “And we like it?” to which the lead dwarf responds, “We love it! We even whistle while we do it.”
Seems interesting also that the Blue Fairy was so adamant about Dreamy/Grumpy leaving Nova otherwise she’s lose her wings; which I think is/was a lie. I mean, in the start of the episode it was hinted that a dwarf never changes; yet Dreamy turns to Grumpy, proving his own theory that he was different. Nova could have been the exception too, if that whole losing her wings bit was true; which like I said, I doubt.
But the end and short of it would be this.
Yes, fairies get their magic from the fairy dust & the price they pay is that they act as overlords of sorts to the dwarves. As Nightreader said, the price is paid with work.