No Shirt, No Shoes, No SSN?
Why do we have Social Security Numbers?
Source: Social Security Administration
Back in the 1930s, the government began a massive undertaking: issuing over 30 million Social Security numbers to American workers. Under the Social Security Act, the Social Security Administration had to track earnings accurately to administer benefits, and they couldn’t just use name and address. The Fred Smiths of New York City had so many identification problems that they formed their own company, Fred Smith, Inc., to be a clearinghouse for difficulties with creditors, employers, and so on.
They used 9 numbers because that’s how most statistical machines operated at the time. The War Department and Post Office used fingerprints, but folks associated fingerprints with criminal activity. Our Social Security numbers were never designed to be secret. The scheme they used – a regional code, a sequence code, and a final identifier – was an efficient way to avoid duplicate numbers.
FDR Signing Social Security Act. Public Domain. Source: New Georgia Encyclopedia
But now these numbers can be stolen. Never mind the data breaches by Equifax and Anthem and countless others. Those companies richly deserve our ire for their sloppiness. A hacker with an efficient program can glean thousands of SSNs just by using an individual’s state and date of birth. In a recent study, two researchers were able to correctly guess the full SSN for people from smaller states about 5% of the time. If you were born in Vermont or Delaware before 2011, when the Social Security Administration started randomly assigning numbers, your identity is at risk.
We all know what we need to do: monitor our credit activity, use identity-theft protection, check our credit card use. Ironically, the same computers that make it possible for creeps and crooks to steal our information can also equip us to protect ourselves. We can check on our credit card and bank activity with just the click of an app.
But it’s a stupid system. Almost every economy in the world uses some kind of identification system to track tax payments and administer benefits. South Africa and India use cards with biometric chips. Most European countries use 11 or 12-digit alpha-numeric identifiers like our cars’ VINs. These systems also use “check-digits” to avoid clerical errors. Biometric identification is now readily available. We’ve used our fingerprint to unlock our smartphones for years, and the iPhone X now uses facial recognition technology – adjusting for glasses, beards, and other cosmetic changes. The 1930s technology embedded in our Social Security numbers has become a threat to our personal finances, and increasingly, to the country’s economic growth.
Because while it’s easier than ever to check for fraud, these scams are sand in the gears of our economic engine. Without a doubt, Equifax and Anthem and the Federal government’s Office of Personnel Management were reckless and irresponsible with the personal data that they’re responsible for. But their hacking problem is just part of our systemic problem. And unless we enjoy reading about the “breach of the day,” we need to change the system.
Douglas R. Tengdin, CFA