Then I dont understand the problem you are trying to address. If you dont tie a units relative power to its upkeep cost then why bother mess with population? Yes you COULD have more units but if their upkeep isnt tied to their relative power you are just using more resources to support the same thing. Since Manpower is the most limited resource and will just keep going down as upkeep is increased then congrats you have 3 more units then he does but still cant afford to replace or reinforce losses...
Allies tend to get pop capped in a good game before the axis players at the end of the mid game. The reduced populations would allow allies to stay on similar grounds through out the rest of the game.
reduction in upkeep will hopefully allow for the manpower drain to not be utterly crippling.
So here is the story that I have seen for myself and on too many streams. Allies do well in the beginning. Axis start fighting back and the game evens out a bit. Allies get earlier armor and pop capped before axis. This halt in unit production allows axis players to catch up In supply and through having bigger marbles continue to do better and better until they outright turn the tables in the late game (some times at the last 100 VP's).
The reduction in populations would allow allies to continue to field more units and have the superior numbers to take on the growing axis army that out scales them.
Plus upkeep is already not tied very well to relative power. Anything in this game with a munitions upgrade isn't represented in the upkeep system at all which is one of the reasons Soviet design is flawed. Players complain about instant wiping capabilities but what else are you supposed to do when you cannot upgrade any of your units to have things like MG's or hand held AT?
Another reason relative power to population is not represented is due to the veterans. Some units have really powerful combat scaling which is not at all seen by the upkeep system. That is one of the reasons OKW scaling is so out of control and why they seem to have little manpower drain. Their units gain such great veterans and combat Prowers that over time they simply do not loose as much