I think it's a bit harsh to call newbie instructors a waste of space. As has already been mentioned there are good low hour instructors, and some woeful high hour instructors. To do the job well you have to want to teach, and when you don't want to any more it's time to move on.
True there is no substitute for experience. But it doesn't have to be flying experience. When I am employing I look on the resume for non-flying teaching/instructing/coaching experience, which more than makes up for low hours eg I have one who was a brand new grade three but had been teaching music for years. His teaching skills were excellent even when he was low hours.
If the flying school is full of very young instructors it will of course seem to a young wannabee that it must be easy, if they can do it I can, so I'll spend X on an instructor rating, in other words it can be a marketing tool.
As for allowing PPLs to instruct, well if they can't be paid, what will that do to the wages of those who need to make a living? Yes, they may be very good instructors, but it will only ever be a hobby to them and would have a terrible effect on the market for those who have taken it a bit more seriously. There are already too many people who think that flying should be done for the love of it, and that anyone who wants to be paid for their skills are somehow greedy. If they want to do it, jump through the hoops and get your CPL, which isn't that hard really especially if the hours you have have been challenging and good skills and experience have been developed.