The other consideration is a 2 yo machine vs a 4 month old machine relating to a $500 difference.
Well they are only one year apart in terms of macOS releases. So while it is possible that the 14 inch MacBook Pro will get one more year of software support compared to the M1 MacBook Air, it is also entirely possible that Apple will end software support for the entire M1 generation at the same time. So in terms of support, I am not sure that is a huge deal.
In terms of design language though, the 14 inch MacBook Pro is definitely the next generation, whereas the MacBook Air is the previous generation. If that is better or worse though, largely depends on personal preference.
Is there anyway you can try the two devices out? The screen makes a pretty big difference. There is also quite a bit of weight difference, in terms of feel on your lap. If you can see them both side-by-side in a store, that might make your decision a little easier.