For over sixty years,
the Standard Industrial Classification (SIC) system has served as the
structure for the collection, aggregation, presentation, and analysis of
the US economy. The SIC
has provided a rich library of past, present, and future economic
The SIC system was developed in the
1930’s at a time when manufacturing dominated the US economic scene.
Over the last 60 years there have been numerous revisions to the SIC
system, reflecting the economy’s changing industrial composition.
However, despite these revisions, the system has received increasing
criticism about its ability to handle rapid changes in the US economy.
Recent developments in information services, new forms of health care
provision, expansion of services, and high tech manufacturing are
examples of industrial changes that cannot be studied under the current
Developed in cooperation with Canada
and Mexico, the North American Industry Classification System (NAICS) represents one of the most profound changes for statistical programs
focusing on emerging economic activities. NAICS, developed using a
production oriented conceptual framework, groups establishments into
industries based on the activity in which they are primarily engaged.
Establishments using similar raw material inputs, similar capital
equipment, and similar labor are classified in the same industry. In
other words, establishments that do similar things in similar ways
are classified together.
NAICS Coding Structure
NAICS uses a six digit hierarchical
coding system to classify all economic activity into twenty industry
sectors. Five sectors are mainly goods-producing sectors and fifteen are
entirely services-producing sectors. This six digit hierarchical
structure allows greater coding flexibility than the four digit
structure of the SIC. NAICS allows for the identification of 1,170
industries compared to the 1,004 found in the SIC system.
Alternate NAICS Structure
In order to facilitate data analysis
and presentation, the US Bureau of Labor Statistics developed an Alternate
Aggregation Structure for NAICS. This design allows for easier
presentation of data in press releases and other publications, and
permits the release of information that would otherwise be suppressed
due to confidentiality rules. The structure contains two domains – Goods Producing and Service Producing – with twelve supersectors containing the twenty NAICS sectors.
Comparing NAICS &
It will be possible to
derive two-thirds of all four digit SIC codes from the new NAICS system
"either because the industry definition has not changed or because
the new industries are sub-divisions of old SIC’s that can be
recombined." However, for the remaining industries time-series
breaks were unavoidable. Familiar terms like Manufacturing, Retailing,
and Services that were formerly used in everyday conversation to
describe our economy will lose some historical meaning.1 The Services
division, which represents nearly forty percent of our state’s
employment, will now be broken into eight industry sectors; restaurants,
which represent one-third of Rhode Island’s Retail Trade, will be in a
new sector – Accommodations and Food Services, and the Manufacturing
division will no longer include the Publishing industry. NAICS will also
assign codes to auxiliary establishments reflecting the primary activity
of the establishment as well as the company.
While the loss of fifty years of
time-series data is troublesome, the Economic Policy Classification
Committee concluded that it is "unproductive to collect and
maintain time series data that have questionable value."
The Labor Market
Information Unit of the Rhode Island Department of Labor and Training
assigns NAICS codes to all registered businesses in the same manner the
SIC code was assigned. Information on the primary activity of each
establishment within a company will continue to be requested at the time
of registration and periodically reviewed through the Annual Refiling
Survey. This information is used to assign the proper NAICS code to all
establishments in the state.
In 1998, LMI began surveying existing
employers in order to assign the proper NAICS code. The
department will maintain both SIC and NAICS codes for all employers
until the end of 2003.