In newspaper archives, we can find references to this practice fairly frequently in the 1937-1940 time period, including headlines like "social security law boon to tattoo artists" and some fun ones like "victim is identified by social security tattoo."
Of course I'm sure the practice was relatively fringe, but newspaper archives show us that it was not, on the other hand, especially isolated. Newspapers report on the practice occurring locally in nearly every state (that existed at the time).
I also think you somewhat underestimate the popularity of tattoos at the time. While they were regarded as fringe and somewhat antisocial, they were widely available and particularly popular in some circles, as they are today.
SSNs were definitely less protected -- I remember mine showing up on my student ID in the 80s, on school rosters in the Navy in the 90s, etc. But tattoos? No.
I am extremely skeptical of this claim. Do you have any sources indicating anything other than a few isolated instances? Not only were tattoos in general distinctly unpopular for most of American history, the Social Security Act was not signed into law until 1935, just six years before the US's entry into WWII. Not only was it controversial (though popular) at the time (being one of the reasons for FDR's dramatic showdown with the Supreme Court, where he bullied them into letting him have his way by threatening to pack the court), the effect of the Social Security program wasn't realized for decades afterwards, and at the time, SSNs had no other purpose.