Is there party level balancing?

My experience as a level 4-6 player playing with my level 26 nephew is that as soon as we grouped, all missions showed as level 21 and encounters or enemies we ran into on the street were high level too since they would kill me with one shot.

From reading comments on another answer I'm thinking the level will be somewhere between the levels of the players, but not less than 5 levels lower than the highest level player.

I did leave the group (caused a reloading wait screen) and start a side mission, then invited my nephew. In this instance, the enemies were still low level, but they had already spawned, and as soon as the mission ended, all available missions on my map were back to level 21.

I wish Ubisoft would fix this, maybe just lower the higher-level player's level temporarily and their gear by an equal amount. The way it is really is the worst of both worlds, he got useless lower level gear and I got killed by a single shot.

The only place you will notice a difference is when you are playing missions on hard.

In the free-roam of New York, levels will not be altered on the NPCs.

In the hard mode missions the level of the NPCs will be determined by the player with the highest level. They will scale accordingly. So it gets really hard for the lower level characters, especially if there is a large difference between your level and theirs.

Normal mode there is a set recommended level that enemies will remain at, with a small variation of maybe one level.