Are Instructors in short supply?

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There's another thing that I don't get.

You want to fly for the airlines. You've done the PPL, done the CPL/IR/ME/MCC all in the minimum required hours (something like 250?) and on the side done all the ATPL exams. The airlines will not want you because you do not "have enough experience".

So instead of self-funding your hour building (e.g. flying IFR airways all over Europe), you acquire an FI, teach a bunch of ab-initio students how to bash around the circuit and navigate to the dozen or so airfields that are within reasonable range yet qualify for the QXC, until you've seen them all and can get there without unfolding a map. Hundreds of hours spent at low level, in VMC, in a simple single engine airplane. Until, at some point in time, you have enough hours PIC to be acceptable to the airlines.

Now someone tell me: how does this additional experience help you in your airline job? Sure, with a bit of (bad) luck you might have some additional experience in dealing with emergencies and a bit of patience in dealing with a strange acting bloke in the LHS will help you as well. But for the rest?

In other words, are we really doing wannabe-airline pilots, and the airline industry, a favour by allowing all these hour-building instructors to count those instruction hours towards unfreezing an ATPL (or whatever it's called), or is this just a conspiracy to keep "the system" working?