I have mentioned this in previous posts, but the biggest cause of the instructor shortage is the JAA training system. Under the CAA self improver route you had to obtain 700 hours to upgrade the BCPL to a full CPL, as a consequence nearly every modular/self improver went instructing to build the required hours. As aerial photography, tug and jump plane jobs are few and far between instructing was the only option for building the hours. The BCPL to CPL upgrade course was available but an expensive option.
Under JAA as you can hold a full CPL with only 200 hours many are opting for self sponsored type ratings as a way into the airlines rather than building hours by instructing. Flying school have always relied on hour builders as a source of instructors and the BCPL was in place for years under the CAA system. Look at the amount of modular 250 hour frozen ATPL holders starting with Ryanair this year by self funding a 737 rating; if the old CAA system was still in place all these candidates would have to instruct to get 700 hours in order to get a full CPL before been able to apply for an airline job.
This is the reason for the instructor shortage 1) Able to hold a full CPL at 200 hours and Self sponsored type ratings.