[Rant] This game's practically dead in terms of actual content.

If it is already a thing, then it should be a lot more noticeable. The idea is to make leveling a viable option to making your character stronger. Currently, the actual damage boost from leveling up is pretty negligible compared to what you can get from equips. If I can't clear X content successfully, then training harder should bring me closer to that goal (to some extent). Maybe even tweak damage formulas, so that being higher level means you receive less damage from a lower leveled boss.

Right now at the same funding levels, a lv 250 character is only barely stronger, and pretty much has piss-all advantage over a lv 200 character. That's not how things should be.

I think the reason it's not as noticeable might be because, much like the drop rate penalty, there's a cap on the damage increase/decrease. For now, I guess I agree with artificially increasing damage purely on the basis of level in the meantime. It's alright, but in the end, what should actually allow you to do more damage would be having more access to skills and equips and stats (though stats are (or, for us, will be) partially taken care of by the new hyper stats)