I agree with everyone decrying working for free, but I have to say I'm not surprised.
Behind this person's offer to work for free is a value/reward calculation largely unique to the flying profession. Most people won't do their jobs for free, because their job is a drag and no fun. Flying, however, is something many people want to do so much they will pay for it. Therefore, for many, it is a net positive transaction to fly for free because the activity itself carries sufficient reward.
I left the flying industry largely because I didn't want to work against this powerful force when supporting my family was on the line.
For those of you making a living as a professional pilot, I see 2 options to fight against this:
1) Make it socially or otherwise unacceptable to work for less than a certain standard. This is the idea behind unions. It is also the idea behind intimidation (as has been suggested in this thread).
2) Improve the value of what you have to offer so that you are no longer competing with most pilots. This is difficult, as it is hard to say what distinguishes one pilot from the next, and many employers don't really care as long as you meet a certain minimum standard. (Hence the prevalence of seniority systems and connections-based hiring.) However, as jrh has been arguing, it can be done, especially in instruction.
I wish you all success.
P.S. I'm in my 2nd year of med school. We are told early on that money is the wrong reason to go into medicine. The truth is that if we found out tomorrow that Obama had set a cap on physician pay at $50,000/year, 99% of us would be gone tomorrow. The reason we are being told not to do it for the money, when money is in reality a large part of our motivation, is to set a professional tone that works against the temptation of doctors to put their financial interests ahead of their patients.
Perhaps flying needs the opposite approach. Very few people go into flying for the money (and those that do probably leave pretty quickly). People become pilots because they are passionate about flying. Here, unlike physicians, the temptation is to put excitement for flying ahead of money. What if, from a student pilot's first exposure to the profession, they were consistently told not to go into aviation just because of passion? Rather, that it is a profession that requires fair compensation and they should be prepared to stand down if the money is not right. Maybe this could make some small difference?