There are greater and greater tax, regulatory, and permitting barriers to entry every year, and crippling costs to making any mistakes. The small licensed-and-taxpaying business my wife and I run will never have any employees because any gain in productivity would be destroyed by overhead costs and time wasted in compliance.
Rick has a point too, there is a lot of underground business going on, particularly on eBay and CraigsList, that live in the grey zone between occasional sales or services and a business that is fully compliant with licensing and other rules.