Thankfully, this doesn't happen on the general folk scene here(Scotland) although it's not uncommon for singers or bands to "volunteer" and play a short support or opening spot on a guest night at a club.
There'll also be musicians who will be happy enough to participate in sessions without payment and, occasionally, even be happy enough to make a small contribution towards the cost of hiring a room in a venue.

Of course, singer songwriters like the young woman here(A lovely voice, by the way)will naturally seek out gigs in other venues as well as or as opposed to folk clubs.

I don't consider it wrong as such for an artist to be encouraged to assist in promoting their own gigs. It's in their own interests that it is well attended but it should be an excuse for the organisers not to bother.
Also, if they sell tickets, it's not necessarily wrong for the proceeds to be added to the total "pot" so to speak as long as a satifactory agreement has been reached. After all, it might be something like a 80%(artist) 20%(venue) split which would probably be quite reasonable.

Providing reasonable terms can be agreed, there is room for a bit of leeway and it's not uncommon for acts to assist in "punting" a few tickets to family and friends for certain events.

Obviously, such actions as described in the video are inexcusable and commercial organisations and promoters are a "different beast" from us friendly folk club organisers and clearly lack the same scruples and integrity.