I personally always thought they should do a similar thing to how wild battles level up in Final Fantasy 8, where the level of the wild Pokemon and your foes, are all linked to an extent into the highest level of your main six. You'd still have a cap as to the highest a wild Pokemon could be at, so no Route One Level 99 Pidgeys, but it'd be reasonable to see them perhaps grow to a maximum of Level 30 whilst later routes would still have a higher cap to emulate the current set up.
A problem with this I see is more with training, especially if other members on your team isn't up to the level of your highest (so switching them in would put them in an automatic disadvantage) but you don't want to focus directly on training them. Even for your strongest member now the battles put them on even footing with the opponent, meaning they won't be knocking out the opponent in a couple of hits (unless they're on a Route or location with a lower cap to their Level) which means they'll be hit multiple times which means more healing meaning more money spent on potions or running back to the Pokemon Center. It'll likely mean players will ignore the wild encounter more than ever if it's essentially going to be a mini-boss fight each time (because if they're also at equal levels the chance of running away isn't guaranteed, and each fail run away attempt is a free hit for the wild Pokemon). Also, it may take away the feeling that NPC Trainers are a greater challenge as they too would probably follow the leveling-with-you rule so be on even par with the Wild Pokemon.