The escalator isn't the real problem, it just takes the blame.
The real problem is that the majority of teams spend to the cap. And the system assumes that teams will, on average, spend to the mid-point.
Let's say (half of) last year's HRR is $2.85B and there are 30 teams. Mid-point would then be $95M. Then they apply the escalator of 5% and the mid-point becomes $100M. Then the cap and floor would be roughly $115M and $85M respectively.
Now, two things can happen:
1) League revenues don't grow by 5% to reach the $100M, but only grow by 3%, forcing escrow to withhold 2% of salaries. This is only a small problem, and revenues have tended to grow close to the escalator rate.
2) Teams spend more than the mid-point, on average. If, instead of averaging $100M in payroll, teams average $110M (because most teams spend to the cap, not to the mid-point, the players are, in aggregate, overpaid by 10%. In this case, escrow withholds 10% of everyone's salary. In fact, this has been what most of the holdback has been from.
(Note: the withholding of escrow actually happens when they are paid throughout the season, and then everything gets adjusted at the end of the year when all the numbers are known and the escrow is either permanently withheld, or is returned to the players, depending on where the numbers fall).
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