The problem is with the statement
y=pop*.asc
The bash filename expansion features tries to find matches for the given filename pattern. If no matches found, the pattern provided is assigned to the variable. In your case, the unzipped pop*.asc file are within the subfolder $files, so no matches are found and pattern itself is assigned to the variable 'y'.
I suggest to have another inner-loop to iterate over unzipped files.
for y in $files/pop*.asc;
do
if [ -f $y ]
then
newy=${y%%.*} #extract "popdnamei" without ".asc" extension
gdal_translate $y $newy.tif #command 1
gdalwarp -s_srs "WGS84" -t_srs "WGS84" $newy.tif $newy_PROJ.tif #command 2
cp $newy_PROJ.tif ../Output_Storage/
fi
done