The conventional spatial homogeneity hypothesis is unable to account for the extent to which population agglomeration affects labor productivity in the context of spatial heterogeneity in China. Using provincial panel data from 2000 to 2012，a heterogeneity test is performed with spatial panel regression and threshold panel regression to investigate the non-linear relationship between population agglomeration and labor productivity. Population agglomeration tends to improve labor productivity but with marked regional differences，showing an inverted U shape relationship which has triple nonlinear threshold characteristics.Differentiated Population policies need to be carried out for different cities according to their stage in the inverted U shape relationship. During the urbanization of Midwest China，education policies are especially important to address the loss of labor productivity due to the excessive agglomeration of the homogeneous lowgrade labor force.