Does offering a yellow belt in Judo "devalue" a black belt: Or does the FM tile "devalue" GM? In both cases, I dont think the awarding of lower grades devalues the awarding of higher ones.
As for demotivation, I'm not exactly sure how that would work.
I think Chess organization have (FIDE inparticular) very much pandered to the chess elite and haven't focused nearly as much time on the lower end of the scale. Which strikes me as quite foolish, given that the vast majority of players will never make it beyond expert let alone GM!.
I say, let them offer titles to the 1400's, convince employers that there is commerical value in employing beholders, and the wait and see if such a simple tactic as this promotes the game of chess.
Surely issuing a title for a 1400 rating devalues the whole concept of titles, and kids who receive honorary titles for such modest achievement might well lose motivation to advance further.