My two cents:
I've been a gigging musician, private instructor, freelance composer, and most recently a music educator. I've also had the opportunity to work in other industries such as photography for many years as well. While I think that everyone needs to go through the phase of working for chum change to get their name out there, I think the problem is that too many people remain in this phase.
I've found that this problem tends to occur more in photography than in music, but nevertheless both fields still experience it. When there are two many amateurs or unprofessionals out in the field advertising to do work (and usually not very good work) for next to nothing, it grossly oversaturates the market and makes it really hard for professionals to ask for fair pay when the client can go elsewhere and get an "adequate" product for a 1/4 the price. In terms of photography, I mainly keep it as a hobby now, because I know I'm competing with a thousand "photographers" with canon rebels and pirated copies of Photoshop who will shoot entire weddings for $200, original negatives included...
Music has tended to be a bit better, but it does create a bit of a dancing game when you're negotiating a wage and you have to hear things like "oh well we had a student group play the gala last year for $200 and they did a fine job". Well that is fine, but if you're expecting a group of 4 Proffesional musicians to come out to your gig, set up, play for 3 hours, and take down for 50 bucks a head, you have to be absolutely insane. In situations like that I usually just tell them I will play solo piano with 15 minute breaks between sets.
Where I come from we have a sort of unofficial musicians union which dictates pay, working conditions, etc. The problem is that a lot of bands do not follow it, and are happy playing for free beer. Again, this makes it very hard for real working musicians to justify asking for a fair wage.
That's my rant... Moral of the story is that everyone needs to start somewhere, but if you have a product, you better damn well sell it for what it's worth, for yourself and the sake of your industry.