It is punitive. They are (and are within their rights to) withholding value because you aren't giving them what they want, which is mineable activity information.
I notice that there are always cartoons of happy users getting additional useful features from their services when tracking is enbled, but never cute cartoons of the other actors extracting value based upon advertising etc. Truth In Condescending Explain-o-Toons, now! etc.
However, once you disable the tracking, the UI no longer show the address and even say "Set location" under Home address and Work address. This let you think that Google doesn't have this information, which is false. This makes me feel like Google got info about me and I can't use it. I find this part dodgy. Once you disable a setting it should be clearer that data is not deleted.
Google Maps UI has a feature to display your set home address, once you turn off tracking or whatever it no longer has access to that home address in its UI so the default state is to ask you to set one.
If that's the case then the real problem would be that the address data is siloed off somewhere in your Google account under maps and isn't accessible to be changed/cleared from your general account settings.
This example shows that that most likely isn't true, since when you disable that setting, they keep all data anyway.
I think it's more of a UX dark pattern where they act like "we only track you if you specifically allow us", but if you don't allow them they will track you anyway, they just do it all behind the scenes.
Seems like a clear violation of GDPR which specifies that collection of additional data except as required to provide the service must be voluntarily.
And no - ads/tracking doesn't count, and no - it is not voluntarily if they punish you for not accepting it.
If data were kept in this fashion under a GDPR right to erasure request, Google would face some hefty fines.
What I don't understand is when we started expecting _anything other than this_ in a commercial transaction. Google's whole thing is they give out services in exchange for information.