It should be illegal - and possibly is - for them to be paid less than minimum wage. But as for instructors' pay in general, this is down to supply and demand. While people are prepared to instruct for low wages, the wages will stay low. And people are prepared to instruct for low wages because they're hourbuilding and it's better than paying to fly, and/or because they love it.
If all instructors who complained about the pay went and got other better paid jobs there'd be a shortage of FIs, and wages would go up (so would prices to learn to fly). But they won't do that, for the reasons stated above. It's very simple.