What is the North American Industry Classification System (NAICS)?
The North American Industry Classification System (NAICS) is a standardized system for classifying business activities developed collaboratively by the United States, Canada, and Mexico. This system employs a six-digit coding structure to identify and categorize business entities based on the type of activity they engage in. The adoption of NAICS was aimed at replacing the older U.S. Standard Industrial Classification (SIC) system, thereby providing a more modern and comprehensive tool for statistical analysis.
NAICS is used for several key purposes, including:
- Measuring Productivity: Helps in determining the efficiency of industries and sectors by comparing output to input.
- Constructing Input-Output Relationships: Facilitates the construction of economic models that illustrate how industries interact with each other.
- Estimating Employment-Output Relationships: Assists in analyzing how changes in output levels within industries impact employment.
- Generating Economic Statistics: Provides a basis for collecting, analyzing, and publishing a vast range of industry-specific data.
Examples of NAICS Codes
1. Retail Trade: NAICS Code 44-45
This two-digit sector covers businesses involved in retail trade, including both store and non-store retailers.
2. Manufacturing: NAICS Code 31-33
This sector includes businesses that are engaged in the mechanical, physical, or chemical transformation of goods, materials, or substances into new products.
3. Information: NAICS Code 51
Businesses in this sector are engaged in producing and distributing information and cultural products, providing the means to transmit or distribute these products, as well as processing data.
Frequently Asked Questions (FAQs)
Q1: What is the NAICS code used for?
NAICS codes are used to classify businesses and collect, analyze, and publish statistical data related to the U.S. economy.
Q2: How do I find my NAICS code?
You can find your NAICS code using the NAICS code search tool available on the official NAICS website or by examining industry classification documents provided by relevant agencies.
Q3: How often is the NAICS system updated?
The NAICS system is updated every five years to reflect changes in industry structure and emerging economic sectors.
Q4: How does NAICS differ from SIC?
NAICS has a different structure and coding system compared to SIC and is generally more detailed and modern, incorporating more recent economic developments.
Q5: Can my business have more than one NAICS code?
Yes, businesses engaged in multiple lines of work across different sectors can have more than one NAICS code.
Related Terms
Standard Industrial Classification (SIC)
An older system of business classification used primarily in the United States before the adoption of NAICS. It employed four-digit codes to classify industries.
Input-Output Analysis
A type of economic analysis that examines the relationships between different sectors of an economy, particularly how the output of one sector is the input of another.
Economic Census
A program that collects comprehensive data on business activity across various sectors, often utilizing NAICS codes for classification.
Industrial Productivity
A measure of the output per unit of input within an industry, often assessed using data categorized by NAICS.
Online Resources
Suggested Books for Further Studies
- “NAICS Pocket Guide” by U.S. Government.
- “Classification Societies: NAICS 2017” by the U.S. Census Bureau.
- “Economic Classification Policy Committee (ECPC) Meeting Minutes” by the Office of Management and Budget (OMB).
- “Handbook of Industry Codes” by Wiley.
Fundamentals of NAICS: Business Law and Economics Basics Quiz
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