Mandatory E-Verify will Increase Identity Theft

Nancy Berryhill, an Acting Commissioner of Social Security, recently testified in front of the House Subcommittee on Social Security on the widespread use of Social Security Numbers (SSNs) beyond their intended function.  Most of her testimony concerned the history of SSNs, past security procedures, and proposed future ones.  In a bizarre sentence that contradicts much of the rest of her testimony, Berryhill stated that, “Mandatory use of E-Verify by employers would help reduce the incidence of fraudulent use of SSNs.”  That is exactly backward.  Mandatory E-Verify will greatly expand the fraudulent use of SSNs.

E-Verify is an electronic employment eligibility verification system run by the federal government that is supposed to check the identity information of new hires against government databases to verify that they are legally eligible to work.  Congress created E-Verify to deny employment to illegal immigrants and reduce the incentive for them to come and remain in the United States.  E-Verify is not yet mandated nationwide but several states have mandated its use, to various degrees, and many large employers currently use it.

E-Verify builds on the current rudimentary employment verification known as the I-9 form that every new employee must fill out thanks to the 1986 Immigration Reform and Control Act (IRCA).  An E-Verify mandate would add another layer on top of the I-9 whereby employers, after collecting I-9 forms, would enter the information on them into a government website.  The E-Verify system then compares that I-9 information with information held in the Social Security Administration (SSA) and Department of Homeland Security (DHS) databases.  The employee is work authorized if the databases decide that the information is valid.  A flag raised by either database returns a “tentative non-confirmation,” requiring the employee and employer to sort out whatever error has been flagged.  If the employee and employer cannot sort out the errors then the employer must terminate the new employee through a “final non-confirmation.”  The I-9 form and E-Verify have serious problems, including the encouragement of rampant identity theft, but those problems would only grow with an E-Verify mandate.

When the government mandated that new hires prove that they are eligible to work in the United States through IRCA, they made the SSN an identifier that can prove legal work authorization.  That move immediately increased the value of having an SSN, even if it was fraudulent.  The result, after 1986, was a massive boom in the creation and sale of black market SSNs, identity theft, and voluntary identity loans that allow employers to obey the letter of the law when collecting I-9 forms and for illegal immigrants to continue to work.  If the government mandates E-Verify then it would mandate a government computer check of the SSNs and other identity documents used to get a job that would increase the value of having a valid SSN even above what the I-9 currently promotes.

Berryhill acknowledges the above point when she testified that, “As long as the SSN remains key to accessing things of value—credit, loans, and financial accounts, and thus numerous common goods and services—the SSN itself will have commercial value, and it will continue to be targeted for misuse.”  She also stated that:

While not intended, the SSN has become the personal identifier most broadly used by both government and the private sector to establish and maintain information about individuals. Before the widespread use of the SSN outside of Social Security programs (for purposes such as establishing credit), there were few incentives to obtain fraudulent SSNs or counterfeit cards. However, as the use of the SSN expanded, so too did incentives to obtain fraudulent SSNs, giving rise to concerns about the integrity of the number and card.

Berryhill does not attempt to reconcile her above statements with her support for mandatory E-Verify.  Presumably, the reason Berryhill states that mandatory E-Verify will reduce fraud is that it will allow the government to check their use more frequently and identify fraudulent use.  This is static thinking that ignores the dynamic real world in several ways. 

First, only a bare majority of new hires are even run through E-Verify in states where the system is mandatory for all new hires.  There’s little reason to think that this would improve under a nationwide mandate without heavy and consistently levied punishments.  Such a low rate of E-Verify compliance significantly weakens the case that a mandate can help weed out fraudulent users. 

Second, an E-Verify mandate will increase the value of fraudulently obtained SSNs beyond the extra cost that a mandate would place on the fraudsters.  The net effect is almost guaranteed to be more identity theft. 

Third, an E-Verify mandate would divert some of the vastly expanded identity fraud black market into identity loans that are much harder for the government to identify and stop.  Retired workers, relatives, and legal immigrants who return to their home countries already sell or give their identities to illegal immigrants so they can work legally and this would expand under a nationwide E-Verify mandate.  Since the legitimate identity owners do not complain about the use of their identities for employment purposes, it is much harder for the government to catch the illegal immigrants using them.  This portion of the black market would just increase.

The expanded use of SSNs has made them more valuable and, thus, the object of much fraud for employment, credit, and other purposes.  The lesson is not that the government should increase the value of SSNs further through an E-Verify mandate but that it should seek to decrease their value by limiting their use for employment or other activities.  An E-Verify mandate would do the opposite and greatly increase the fraudulent use of SSNs. 

Originally published in the Cato Institute blog.


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