Does it help or hurt a sole proprietor to give contract employees a 1099?

As a sole proprietor you are required to issue 1099MISC to subcontractors for money you paid to them.  If you were ever audited and took deductions for payments to subcontractors and you didn't file the 1099 for them, the IRS can penalize you for failure to file the forms. 

So the short answer is...it never hurts you to file the forms.  But it can hurt you if you DON'T file the forms.

I should have added, that only those you paid $600 or more in the year are required to have a 1099MISC issued to them.