1/16/2004
NAICS Bulletin
Introduction
A Bulletin from the Texas Workforce Commission, Labor Market Information Department
An Explanation of the North American Industry Classification System (NAICS)
How it may affect Labor Market Information customers
The Office of Management and Budget (OMB) in cooperation with agencies from Mexico and Canada has developed an industry classification system called the North American Industry Classification System (NAICS, pronounced "nakes") that replaced the Standard Industrial Classification (SIC) system. While work has been underway since 1993, OMB formally adopted NAICS on January 16, 2001.
History of Process
The Office of Management and Budget established the Economic Classification Policy Committee in 1992 to pursue a fresh slate – the examination of economic classifications for statistical purposes. 1 Since 1939 the U.S. has used the Standard Industrial Classification (SIC) system for classifying industries. While SIC has undergone periodic revisions (the last in 1987), rapid changes in the U.S. and world economies has brought the system under increased scrutiny. In response to the need for a classification system that better reflected the dynamic nature of economies, OMB established the Economic Classification Policy Committee.2 Government agencies from the United States, Mexico and Canada were tasked with the development of a system that accounted for rapid changes in the U.S and world economies.3
Industrial Classification vs.Occupational Classification
NAICS is a system concerned with classifying organizations into different industries; as opposed to classification at the occupational level. The newly revised Standard Occupational Classification (SOC) system classifies occupations by job duties. Occupations specific to certain industries may be found in a different industry category because of the shift to NAICS, yet the Standard Occupational Classification Code remains the same. Systems like O*NET and other classification systems based on SOC are not subject to changes because of the shift to NAICS. Professionals who use information at the occupational level will not notice changes in job categories as a result of the shift to NAICS, unless they are looking at occupations by industry.
Benefits
Comparable - NAICS is organized in such a way so as to allow direct comparison of economic data with our NAFTA trading partners Canada and Mexico.
Relevant -NAICS recognizes hundreds of new businesses in the economy with 20 broad industry sectors, up from SIC's 10. Some new industry categories include an Information Sector and a Health Care and Social Assistance Sector formerly lumped into Services under SIC.
Consistent - NAICS classifies an organization based on how it produces something, not simply what it produces. Businesses that use identical or similar technologies and processes to produce something will be grouped together. For example, software creation falls under the new Information Sector, while software duplication falls under Manufacturing. Under SIC both enterprises were grouped under the same major industry sector, because both were engaged in the production of software.
Adaptable - Regular updates account for emerging industries not currently known.
Things to Consider
The shift to NAICS means a break in historical time series. SIC and NAICS industry groupings are not directly comparable since the code changes for NAICS have split some SIC groups.
1 Executive Office of the President Office of Management and Budget. North American Industry Classification System. White Plains, MD: Bernan and U.S. Department of Commerce, 2002
2 ECPC is chaired by the Bureau of Economic Analysis, U.S. Department of Commerce, with representatives from the Bureau of the Census, U.S. Department of Commerce, and the Bureau of Labor Statistics, U.S. Department of Labor
3 Specifically, Mexico's Instituto Nacional de Estadistica, Geografia e Informafca (INEGI) and Statistics Canada
|