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It doesn't have any effect on difficulty. Unwaveringly Loyal pawns don't have any special spawning mechanics and aren't better than normal pawns on average, and turning the option on does not cause extra enemies to spawn. The mechanic just takes random pawns from a normal raid spawn and makes them unwavering and less likely to die when downed.
The intent was purely to increase the "prisoner economy" without increasing recruitment rate, making the various other actions you can do with prisoners more relevant. The developers specifically said it was not intended to make the game more difficult, you don't get extra enemies, they aren't harder to deal with, and you aren't supposed to get fewer normal recruits (though it does actually reduce normal recruits slightly). I believe some of this is even stated in game on the option tooltip.