There's an old joke, it goes something like this:
What's the difference between a scuba instructor and a large pizza?
A large pizza can feed a family of four.
So, I'm following this thread with a lot of interest.
IMHO, one of the biggest problems with trying to earn a living in this activity is there is always someone willing to work in scuba "for the love of the sport" and someone working for peanuts devalues instruction. This leads to the "race to the bottom" mentality, which tries to go for quantity over quality and this is why we still see OW scuba classes being sold for <$500 today. When running cheap scuba programs, something has to give somewhere, and it's usually in the areas of student contact hours or ratios. The course is either the bare minimum in time (3 days), or there are 6-8 students per instructor, or even both.
The other thing that can happen when you see cheap courses is quality of instruction can go down. The more experienced an instructor gets in the activity, they either move on to teach more lucrative courses OR they drop out altogether because unlike that pizza, they can't feed their family while working in the lower rungs of the activity. And, sadly, in some cases when you opt for a cheap course you either wind up with very burned out instructors going through the motions, or someone that while enthusiastic, is very green and new to scuba instruction. To be clear, that isn't ALWAYS the case, there are some very good, passionate, experienced instructors that are able to do this for cheap, but they are the rarity.
I truly believe one of the best things the industry could do to reform itself is focus less on OW certification courses and instead push for more DSD's, but with smaller ratios and a quality experience as their "first hit" on the scuba crack pipe. If the bug bites them and they get the urge to continue in the activity, they should pay for and receive a quality course. Under this model, it would be realistic for instructors to earn living (and even decent) wages. A person earning a decent wage will hopefully be more inclined to truly be a professional, treat their customers fairly, produce quality products (courses), and stay in the industry long term.
To give a comparison of how this model could work, let's look at skydiving. I pulled up two local skydiving web-sites and this is what I found:
A tandem jump, which is usually a 2-4 hour "experience" and includes a video of your flight, averages $200. Think of this as your DSD.
An accelerated free fall program, which looks to be about 4-5 days of instruction (and 7 jumps), is $1350 if you buy it as a package, and $1500 if you go piecemeal. Think of this as your basic OW scuba course.
If scuba instruction were priced where a 1/2 day DSD experience were in the ~$250 range and a 5 day OW course were ~$1750, I think it would be quite possible for an individual to earn a living and maybe even make a decent wage if they were fairly organized about it. The problem is selling these experiences/courses when there's a guy down the road offering a 3 day scuba certification for $500.
On my side, I'm pretty much close to the top of the dung heap when it comes to cave and tech instruction (I'm a cave/cave CCR instructor examiner), and while I believe I charge more than "market" prices (I have a 2 student minimum which means a solo student is paying significantly more), I make more per day at my day job, especially once you add in healthcare, leave and retirement benefits. Things that influence how much I make teaching include fixed costs (agency dues, insurance), variable but constant costs (gear repair/replacement, vehicle wear & tear), market demand (how many students/classes I can book), and how many days a month I can physically work in a month. However, I'm pretty sure I could earn a decent living wage if I were to cast off my day job, but it took me years of blood, sweat and tears to get here.