The real answer to the original question is of course supply and demand, which determines the pay rate for everything. If the demand for people willing to lie on a mattress were stronger than the supply, L'il Abner's mattress-testing gig would pay better. And if more people were willing to spend their time on earth buying companies and firing everyone, Mitt Romney wouldn't be as rich as he is.
In the case of folk music, my impression is that the ratio is 10 people who want to perform it for every one person who wants to listen to other people performing it. And that seems like a good thing to me. Music should be an experience, not a consumer product.