Whatever Happened to the NAICS? (North American Industrial Classification System) (Industry Classification)

By Garritt, Fran | The RMA Journal, May 2002 | Go to article overview

Whatever Happened to the NAICS? (North American Industrial Classification System) (Industry Classification)


Garritt, Fran, The RMA Journal


Nearly three years ago, The RMA Journal presented "Moving Toward NAICS" (June 1999). At that time, author Mark Zmiewski reported that NAICS would replace the SIC code "eventually." So what's been going on?

In the spring of 1997, the Office of Management and Budget (OMB) replaced the Standard Industrial Classifications (SIC) with a new industry classification system called the North American Industrial Classification System (NAICS). The SIC system classifies most of the data we have about industries or kinds of businesses in our economy. The SIC system has been revised or updated every 10 or 15 years since its beginning in the 1930s to reflect new developments in the American economy and to address problems identified by data users and statistical agencies.

The last revision of the SIC system in 1987 identified a number of new high-tech industries and tripled the number of classifications within computer-related services. This revision also provided, for the first time, industry categories for computer and software stores, videotape rental stores, and manufacturers of plastic bottles. Nonetheless, the 1987 revision left three-quarters of all industries unchanged and the broad structure and hierarchy intact, including such basic sector groupings as manufacturing, retail trade, services, and construction.

The 1997 revision of industry codes included much broader objectives than just adding new industries. The process also wanted to reorganize the system according to a more consistent economic principle, according to types of production activities performed rather than the mix of production and market-based categories in the SIC. This reorganization allows for the presentation of more detail for the rapidly expanding service sector that accounts for most economic activity but only 40% of SIC categories. In addition, the industry classification system was redefined jointly with Canada and Mexico so that comparable statistics could be obtained for the three NAFTA trading partners.

In 1992, OMB formed the U.S. Economic Classification Policy Committee (ECPC), chaired by the Bureau of Economic Analysis (BEA) and staffed by BEA, the Bureau of Labor Statistics, and the Census Bureau. The ECPC worked together with Statistics Canada and Mexico's Instituto Nacional de Estadistica, Geografia e Informatica (INEGI). This international dimension became so important that, despite national variations, all three countries are referring to the new industry classification as the North American Industry Classification System (NAICS).

NAICS has replaced the SIC system and will reshape the way we view our changing economy. The NAICS proposal was fleshed out, industry by industry, in a series of Federal Register notices from 1994 through 1996. The entire proposed classification system appears in the Federal Register notice of April 9, 1997. For the definitive reference, please refer to the North American Industry Classification System-United States, 1997, counterpart to the 1987 SIC Manual. More information is available on the website--www.census.gov/epcd/www/naics.html.

What Is NAICS?

NAICS is a system for classifying establishments by type of economic activity. Its purposes are to facilitate the collection, tabulation, presentation, and analysis of data relating to establishments. The NAICS will also promote uniformity and comparability in the presentation and analysis of statistical data describing the economy.

* NAICS identifies hundreds of new, emerging, and advanced technology industries. And NAICS reorganizes industries into more meaningful sectors--especially in the service-producing segments of the economy.

* NAICS defined industries according to a consistent principle: businesses that use similar production processes are grouped together.

* NAICS will be reviewed every five years, so classifications and information keep up with our changing economy. …

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