Liber(al)tarian Labor Myths
Open border libertarians like to pretend that the supply of immigrant laborers has no effect on the welfare of existing United States workers. But this is not the case.
Broadly speaking, the welfare of an average Joe who trades his labor for a living depends on two factors. The first is labor productivity which determines how much employers are willing to bid for workers. The second is the supply of labor of similar quality. Increasing the supply of labor with a particular skill set will bid down the wages of workers with substitutable skills.
If we were to follow proposed libertarian policy to throw open the borders and offer amnesty to illegal immigrants, then broad swaths of the lower-middle class dependent on low-skilled jobs will see their incomes decline. At the same time libertarians also propose to cut down government transfer payments, sharpening the blow. And we wonder why we have a hard time proselytizing such an attractive policy package! I doubt the most impassioned and rigorous moral arguments from first principles will ever convince vast hordes of the lower-middle class to support policies against their economic interest.
There is no a priori reason to think that labor markets are immune to economic incentives. Since I have been engrossed by the excellent History of Rome podcast, let's take an example from Roman history. The Republican period of Rome was marked by the era of the freeholding citizen farmer. Most Romans had their own land and lived a good life. But by the time the empire got settled in around 100 A.D., population growth and an influx of slave laborers from the wars of empire had decimated the labor market. Less than 10% of the free citizens of the city of Rome were able to survive without some form of handout, either public welfare or private charity. The average citizen was a squalid beggar and the Gini coefficient approached 1.
So yes, bad things can happen. Conditions can get worse. And bad conditions can last a long time.
The modern world is a very different place than ancient Rome. Capital accumulation and technological progress are much faster and these two forces drive labor productivity ever upwards. Also, globalization of the economy has made capital more mobile. This means the declining wages suffered by workers in a particular country because of an increase in the labor supply will be mitigated by capital moving to take advantage of the lower wages which in turn bids wages back up.
But we are foolish if we believe the price of labor is immune to supply and demand. Open border libertarians preach policies that will worsen the lives of large numbers of people that aren't well off to begin with. In any political system, but especially democracy, large groups command power, and the 74% of poll respondents that support Arizona's aggressive approach to stemming the flow of illegal immigration command a lot of power. This is why neither party is particularly friendly to immigration right now including, unfortunately, the highly-skilled immigration which is most likely to create and attract international capital investment.