The History of NAICS Codes
1930s - 1980s: The Standard Industrial Classification (SIC)
Implemented in the late 1930s, the Standard Industrial Classification (SIC) was used to classify establishments and track industries to provide standardized data for analyzing the US economy. The SIC defined industries and covered most economic activities. The SIC was first written as the List of Industries for Manufacturing in 1938, followed by the List of Industries for Nonmanufacturing in 1938.
The Office of Management and Budget (OMB) last revised the SIC in 1987. The SIC was revised periodically to keep up with a changing and evolving economy. However, as new approaches on how to classify economic activity came to light, the OMB established the Economic Classification Policy Committee (ECPC) in 1992 with intention to revise the 1997 SIC. However, in 1994, OMB announced plans to develop a new industry classification system along with Mexico's Instituto Nacional de Estadística y Geografía (INEGI) and Statistics Canada.
1990s – Present: The North American Industry Classification System (NAICS)
Both the ECPC and Statistics Canada reviewed the 4-digit industries of the 1987 US SIC and the 1980 Canadian SIC to determine how to move forward with the desire to change the system. Finally, ECPC joined with Mexico’s INEGI and Statistics Canada to establish the North American Industry Classification System (NAICS) in order to make industry statistics comparable across these three countries. The NAICS was built to replace the 1987 US SIC, the 1980 Canadian SIC and Mexico’s 1994 Mexican Classification of Activities and Products (CMAP).
In April 1997, along with an official notice from the US Census Bureau, the NAICS was implemented and statistical agencies began the transition from the SIC to NAICS. The NAICS is reviewed every five years due to the nature of the ever-evolving world economies and revised to reflect the changes and developments in the economy of the United States, Canada and Mexico. As a result, after being implemented in 1997, the NACIS has been revised in 2002, 2007 and 2012. The latest edition of the NAICS was published in 2017, and consists of 20 sectors and 1,057 industries.
The NAICS was established to classify establishments by type of primary economic activity, facilitate the collection and analysis of data relating to these establishments and promote the uniformity and comparability of statistical data across the North American economy.
The NAICS accommodates a wider and larger number of sectors and provides more flexibility in including subsectors, unlike the SIC system which classified industries in a 4-digit SIC code. An industry is completely defined at its six-digit NAICS code. The international NAICS agreement, which includes the US, Mexico and Canada, holds up to the first five digits of the code, which are standardized. The sixth digit is used to identify subdivisions of NAICS industries that belong to its respective country.
Differences from SIC to NAICS
The SIC system consisted of 10 divisions. In contrast, there are a total of 20 broad sectors in the NAICS, which reflect some SIC divisions broken down and subdivided into new sectors. However, some SIC divisions were also combined to create new sectors. NAICS includes increased detail in services, with new sectors such as Information; Professional, Scientific, and Technical Services; and Administrative and Support, Waste Management and Remediation Services. There is a new Accommodation and Food Service Sector.
Under NAICS, some economic activities previously classified under the Manufacturing, Wholesale Trade or Retail Trade sectors have been moved under the Services sector.
Furthermore, as the internet has gained prominence in recent years and became an important medium of conducting business, the NAICS implemented two new industries: 454111 Electronic Shopping, and 519130 Internet Publishing and Broadcasting and Web Search Portals. As the utilization of the internet has evolved, so has the NAICS.
For the 2022 revision, the ECPC is anticipated to keep the NAICS as updated as possible by reviewing and recommending proposals for new or revised industries by the public and taking into consideration the key principles of the NAICS.
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