Terry Prattchet did this really well with gnomes.
The problem is this: there are many jobs in the city for which a gnome is equally (or in some cases more) competent, such as rat-catching (as detailed above) and watch-making, as their small hands make them ideal for performing intricate work. As money is generally paid for the amount of work done, gnomes are invariably paid the same for doing these jobs as a human or dwarf would. However, as a gnome is much smaller than a human or a dwarf, the money will stretch further. For example, a dollar might buy a loaf of bread. To a human or dwarf, that is two or three meals. To a gnome, the same loaf of bread is food for a week and can also be hollowed out to provide emergency accommodation.