Damage and Defense
Damage with physical weapons has to scale because armor rating scales. As enemies gain better armor ratings, you have to be able to dish out more damage to overcome their defenses.
Destruction damage doesn't scale because armor doesn't block magic damage. Resistances reduce a % of damage, but only of a certain type of damage.

If you have a 1h damage rating of 1500 but your opponent has 3000 in armor and is blocking with their shield, you will not hurt them with a physical attack.
If you cast a spell that does 50 damage and your opponent has 3000 in armor and is blocking with their shield, you will still do 50 damage.

Health doesn't scale by default, and fortifying it means sacrificing offensive capabilities (either stamina or enchantments).
Defense against magic does not scale at all, with the exception of possibly the ward spells.

Basically - physical damage scales because physical damage resistance scales (ie because it has to). Magic damage does not scale because magic damage resistance does not scale (ie it doesn't have to).
The lack of "scaling" does not make it less viable at higher levels, because higher level enemies take just as much damage from spells as lower level enemies. The same thing cannot be said for physical damage.

Damage != DPS
I may be wrong here, as I haven't empirically verified this, but based on my observations it appears to me that Destruction cast time is a function of the magika cost of a spell - ie the amount you have to "charge" a spell looks to be dependent on the magika it requires (not sure how this works with scrolls, and it may work differently with other schools). As you level destruction it takes less magika to cast spells - > less time to cast spells -> higher DPS.


Conclusion
Damage doesn't scale because Magic Defense doesn't scale
DPS does scale, to counter higher health of later enemies

The system is not broken. Regarding things being OP - IMO finding ways to exploit the rules of a TES game for extreme results is half the fun (morrowind potions, anyone?)

Yes you are right but right now there are exploits to increase your melee damage to insane proportions fairly easy. Pair that with enchanting and the fact that weakness to [insert element here] is only good for weapons you have an OP aspect to this game.

I'm not assuming this means magic is UP, I have yet to see high level magic in action.

Right, just trying to address some of the claims that destruction is not viable at higher levels due to a lack of scaling.

"Exploits" are things done to specifically circumvent game mechanics one is expected to deal with. An example of this is bugging a dragon so that he is stuck and cannot fight back. "Willful act" + "ignored mechanic" = Exploit.

Just because alchemy, enchanting and smithing synergise well doesn't make them an exploit. It's a skill system.

Who cares if melee can get to an OP state? It only happens if you set out to become OP so there is nothing wrong with it. Unless you are saying you want magic to be able to become super OP as well...

"Why destruction magic damage doesn't scale and 1h does"

Bethesda makes bad decisions.

/Thread

Higher level mobs have higher HP pools meaning the damage percentage done to them by magic gets less every level.

It does scale. Just make a Poison that has "Weakness to Magic" and "Weakness to Element" then apply it to a arrow, fire that poisoned arrow into your opponent, then whip out the dual cast and watch the enemy drop deader than snot on a door knob.