North American Industry Classification System
The North American Industry Classification System (NAICS) has replaced the U.S. Standard Industrial Classification (SIC) system. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.
NAICS is a unique, all-new system for classifying business establishments. It is the first economic classification system to be constructed based on a single economic concept. Economic units that use like processes to produce goods or services are grouped together.
This production-oriented system means that statistical agencies in the United States will produce data that can be used for measuring productivity, unit labor costs, and the capital intensity of production; constructing input-output relationships; and estimating employment-output relationships and other such statistics that require that inputs and outputs be used together.
Standard Industrial Classification
The Standard Industrial Classification (SIC) Codes, used since the 1930s, was developed by an Interdepartmental Committee on Industrial Statistics established by the Central Statistical Board of the United States. Its charge was to develop a plan of classification of various types of statistical data by industries and to promote the general adoption of such a classification as the standard classification of the Federal Government.
That list of industries for manufacturing, published in 1938, and the 1939 list of industries for non-manufacturing industries, completed in 1939, became the first Standard Industrial Classification (SIC) for the United States.
By the early 1990s, many data users and analysts were criticizing the SIC as outmoded and not reflective of the economy of the United States. The adoption of the North American Free Trade Agreement underscored the need not only to develop a new system, but also to develop that system in cooperation with Canada and Mexico.
In early 1992, OMB established the ECPC, comprised of representatives from the Bureau of Economic Analysis that chaired the committee, the Bureau of the Census, and the Bureau of Labor Statistics, and charged it with a "fresh slate" examination of economic classifications to determine if a new system should be developed and whether or not that new system should be based on an economic concept.
NAICS is based on a consistent, economic concept. Establishments that use the same or similar processes to produce goods or services are grouped together. The SIC, developed in the 1930s and revised periodically over the past 50 years, was not based on a consistent economic concept. Some industries are demand based while others are production based.
NAICS recognizes the changing and growing services-based economy of the United States and its North American neighbors. NAICS includes 1,170 industries of which 565 are service-based industries. The SIC had 1,004 industries of which 416 were service related industries. 358 new industries are recognized in NAICS, 250 of which are services producing industries. There are 20 sectors in NAICS of which 16 are services related. The SIC had 10 divisions of which five were service-related.
- NAICS provides for comparable statistics among the North American countries. In addition, it provides for more comparable information. The SIC did not.
- NAICS is a six-digit system that provides for comparability among the three countries at the five-digit level, albeit with a few exceptions. The SIC was a four-digit system that was not linked in any way to the systems of Canada and Mexico. A six-digit system was adopted for NAICS to provide for increased flexibility in the system. NAICS allows each country to recognize activities that are important in the respective countries, but may not be large enough or important enough to recognize in all three countries. The sixth digit is reserved for this purpose.
- You may find a NAICS Code for a specific industrial activity by visiting Census.gov.