MrAverage....I don't disagree with you if you acted in isolation, although this depends on your geographical area and your local competition. What is really needed is an industry wide effort to to raise the earnings of good and dedicated instructors otherwise the industry as a whole could die the slow death as mentioned on this thread.
I also understand the industry is skewed and has been forever. The need for hours in the logbook for so many pilots before being able to get the airline job, has led to many being prepared to "fly for food". I once saw a T Shirt with this printed on, worn by an instructor that came in looking for a job! School owners are bound to take advantage of this, its simple economics as you say. So it is tough to charge a profitable rate and pay the right wage, but I honestly believe, the time is now, if things can't improve in the current market conditions, they never will.
I also believe the consumer can afford it, no-one wants to make flight training elitist and only available to the well off, but consider this. In 1986 I was charging around 100 pounds for a PA28 & 220 pounds per hour for a PA34 and we had plenty of customers. Put in perspective, a 5 bedroomed luxury house in those days cost less than 100,000 pounds and the average wage was around 12,000 per year....people seem to find the money to learn to fly.
SJ