The SIC Are Dying: New Federal Industry Code on the Way

Article excerpt

Established in the 1930s, the Standard Industrial Classification (SIC) codes have long formed a framework structuring most federal and many private collections of industry statistics. So prevalent have the familiar SIC codes become, that many textual business databases use them to sort non-statistical articles and reports on industries and products.

Information Access Company uses the SICs throughout their bibliographic and full-text databases, as, of course, does Dun and Bradstreet in their business directory and financial files. Even the Hoppenstedt Directory of German Companies uses the U.S. SIC codes.

But the SICs are on the way out. Several years ago, federal statisticians from the Bureau of the Census and Bureau of Economic Analysis in the U.S. Department of Commerce and the Bureau of Labor Statistics in the Department of Labor formed the Economic Classification Policy Committee (ECPC) under the Office of Management and Budget (OMB). The ECPC has created a new industry classification hierarchy called the North American Industry Classification System (NAICS -- pronounced "rakes" as in asps). With the launch of the 1997 Economic Censuses by the Bureau of the Census in December 1997, the NAICS codes will replace the SICs. The Census will start the transition, maintaining double data filed under the old and new codes for the 1997 statistics, but all government agencies and most private sector statistical collectors and disseminators are expected to follow the new codes sooner than later.

The new NAICS code will apply to all industries in North America, as the ECPC team has worked jointly with Statistics Canada and Instituto Nacional de Estadistica, Geografia e Informatica (INEGI) to establish a common industry code scheme for the United States, Canada, and Mexico. According to Jack Triplett, chairman of the ECPC, the project to build a new coding scheme to replace the SIC codes originally targeted only the United States, but expanded into a three-country project with the addition of Canada and Mexico.

The expansion into a multi-national code slowed down the process somewhat, according to Triplett. At one time this year, Triplett had different teams rotating in and out of Mexico for weeks on end. But they expect the three-country coverage to increase the code's usefulness. Shortly before the release of the "final" hierarchy for "final" public comment, several problem areas between the three countries loosened up and only a few areas remain unclarified.

The transition to the new code will begin with the 1997 Economic Censuses. The new code uses six-digits. Data collection for the Economic Censuses will actually begin in 1998. However, the Bureau of the Census will issue new forms in December 1997. The first report issued using the NAICS codes should issue in December 1998 with statistical detail at levels equivalent to the two- and three-digit SIC codes. By 2001, statistical reports using the full range of NAICS code should be out.

The Good News

"What's in it for me?" Good question, business searchers. The new NAICS code system will offer substantial advantages.

The Reality Factor: The basic conceptual framework behind the old SIC codes is posited upon an image of the U.S. economy set in 1940, as Triplett points out. It does not match the realities of today's economy. Repeated tinkering every seven years or so has kept the SIC codes moving forward, but finally the old system just failed to serve the needs of economists, planners, and statisticians.

The NAICS code will support process and production factor analysis about industries and contribute to a better understanding of factors affecting economic policies. It will also support more detailed industry operational analysis. The NAICS category encompassing restaurants, for example, will distinguish between restaurant by type of service and other distinctions. The Apparel category will differentiate between contract manufacturing and direct manufacture. …