Plantation workers? Miners? You don't need them to be skilled at something. Any sort of unskilled labor that makes money is more profitable with a slave (upkeep and a one-time cost of buying the slave, plus possible children born into slavery) than with a servant (must pay wages that are always more expensive than the upkeep, no chance of a free slave out of it). Further, gnomes are great because they are easy to pick out of a crowd, thus making it hard for them to escape, and suck at physical fighting, so far less chance of a revolt. Finally, the lower classes would not be ticked that their jobs are being taken, because it "was a gnome's job anyway" and they are better than those little dudes.
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This is all just a possible reason to explain why gnomes are sought as slaves, I think all imaginary species are created equal.

I'll look through the spell levels later today.