The margins are just too tight. There is nobody making serious money from running a flying school - at very best they have about 10% and most will be closer to 5%.
I would love to see instructors getting more than the girl who does accounts or the lad who is supervised by the chief engineer. In fact, it embarrasses me to see pilots trying to live on not much more than the minimum wage. But until the punter recognises that the business is expensive things will stay the same. We are actually guilty in adopting playground politics by trying yo under-cut the opposition. In some way it is a pity that there isn't dome form of flying school cartel. (Slightly tongue in cheek).
PS. I don't buy into any argument that the regulatory burden is the overwhelming factor. It is a combination of regulation, consumables, spares and other operating costs which make a 40 year old Cessna so expensive to operate.