Unfair Competition
Although cheapskating, to reduce costs and the price of the product, is usually popular with consumers, it is unfair to businesses which operate ethically and within the law.
Cowboy club or commercial FTO's should not be supported by students.
Typically, any business which is dubious in terms of employment will, also, be cutting corners in other areas of its activities- insurance and maintenance being obvious examples in FTO's. Your cheap(er) lessons may end up being an expensive or terminal experience.
The (low) pay of instructors issue is much older than PPruNe although it seems to be contradicted by that other old chestnut- the shortage of instructors.
The unavoidable problem is that day-to-day demand for instruction in the UK is extremely variable and highly unpredictable so an annual 'decent living wage' isn't possible for most FTO's or instructors. Add to that, the well-known amateurism/enthusiast approach which typifies UK flight training and you have a perfect recipe for poverty affecting proprietors and employees.
The fact is that, because plenty of people love football, flying, riding, sailing etc., many are not involved in such businesses for rational economic reasons.
I've never met a poor scrap dealer or funeral director and I did meet a man who has made a lot of money from CAA/JAA PPL's (in Florida) but, sad to say, that's never likely to happen here unless........ landing fees are abolished, fuel duty is slashed, the climate changes etc. etc.