I think we completely agree - but differently.
My approach is to not play in that market segment. Up your game! Make whatever changes you need to make to not be in competition with the "free beer" bands. It may take a little while. It make take some effort.
My band is not setting the world on fire by any stretch of the imagination - but we don't play for $100 a man and free beer bands don't scare me at all. We also do not target the House of Suds gigs.
(You know, we've drifted way off topic for this thread. Sorry OP!)
Yes, The first step to upping your game (aside from becoming an accomplished player of course) is to set a personal pay standard and if you are offered less simply refuse the gig. For the past 25 years or so, unless for a charity or benefit, I won't take the gig unless it pays at least 100 bucks, which has taken me mostly out of the bar band scene. However, as both an electric and upright player, playing numerous genres of music, I have been fortunate that in my locale there are a number of resorts with a fairly substantial pay scale that have kept me plenty busy.
So again, I agree with you, but do think our conversation about principles, setting personal standards, "upping the game" as you say, is completely applicable to the OP topic.