Right, leaving aside the issues of CAC (and yes I do have experience of the place.) is there a shortage or not?
Send Clowns makes a good point in that until there is a chronic shortage and the "value" of an FI goes up to a sensible level, then we can't say that it is too bad.
As the supply of FI's dries up (which it is doing to a certain extent) then clubs will have to start paying more, though to be honest we will always be fighting a losing battle against the airlines. Most CPL holders really don't want to instruct, they are forced to do it in a quest to increase their experience and make themselves more palatable to an airline.
Until we get career FI's, then this won't change. At my club, we are all part-timers and get our living from either an airline or some other career. This really just makes the best of a ridiculous situation. Hopefully we can eventually reach a time where an FI is a valued member of the aviation community rather than the "poor relation" (in more ways than one!)
When we get that, then hopefully we won't get this boom and bust situation which is utterly cr*p for the long term health of flight training in this country.