It's the core flaw of the story, I already pointed out in the EA. You are in a prison with all those elite super bad boys and still are able to kill them all with your lousy gear, while traders somehow are able to restock out of nowhere with most epic gear. Immersion is totally broken
Regarding natural natural progress regarding humanoid: Thugs, Recruits, Soldier, Veterans, Elites... There are enough classifications to make it natural to expect a different level of challenge from units.
