As you note, there are something like 700,000 licensed people in the US, but if you tune in to your local repeater and listen for a month, you will hear the same 2-8 people, typically in their 70s - and that's about it. They're there due to force of habit, and when they die, they're not going to be replaced. The same demographics can be observed for most ham clubs, maybe outside the SF Bay Area (where the median age is closer to 50).
So what are we really protecting here - a "community" representing and speaking on behalf of maybe 0.1% of all licensed individuals? Is this something to treasure, or should we bite the bullet and instead encourage a larger group of people to build something new?
And I hate to say this, but I think this situation is of their own doing. The old-timers wanted all the newcomers to follow in their footsteps and get excited in exactly the same things. As evidenced in the community-developed ham exam, which deals with such exciting and timely topics as tuning vacuum tube amplifiers, receiving analog slow-scan TV signals, memorizing Morse code shorthands, and DX contests that lost most of their "oomph" when the Internet showed up.
Meanwhile, VFH / UHF handheld-to-handheld messaging is still an elusive technology, and many old-timers don't consider anything above HF to be "real ham".
That's a lot of text to just tell everyone you made up a bunch of shit. None of that shit is on licensing exams. What is on the exams are things demonstrating you've got enough knowledge to not electrocute yourself, not get RF burns, not turn your radio into a jamming device, and understand the etiquette for sharing very limited bandwidth available to amateurs.
Vacuum tube amplifier tuning: E7B09, https://hamstudy.org/browse/E4_2016/E7B
Analog slow scan television signal components: E2B10, https://hamstudy.org/browse/E4_2020/E2B
Morse code shorthands: G2C02, https://hamstudy.org/browse/E3_2015/G2C
Some morse shorthand is useful. CQ for instance. QRM, QSO and many more are all used for voice as well.
However, I will not defend the old guard too far. I get tired of the right-wing boomer conversations pretty quickly. Everything was better in the past....blah blah
Right now at night we turn on the radios and check the local repeaters for activity and whatnot. Hear some interesting QSOs. If everyone is chatting encrypted this won't work.
It also would enable people to use it as a free alternative for a commercial license - after all when it's encrypted we can't check that it's not used for such a purpose anymore. Using locations as you suggest isn't enough as it will need really targeted surveillance. Also, for a warehouse any of the free radio modes are more than sufficient in range.
The ban on encryption isn't really much to do with espionage. Spies don't need a license.