18th International Roundtable on Business Survey Frames
Beijing, China 18 – 22 October 2004
Session No 4
Edward D. Walker and Ron S. Jarmin
U.S. Census Bureau
Implementing a Major Revision to the Industry Classification System1
1
Introduction
1.1
In 1997, the United States adopted the North American Industry Classification System
(NAICS) as its new standard for categorizing business establishments by primary activity and
for collecting, compiling, disseminating, and comparing industry statistics. Developed in
collaboration with North American partners Canada and Mexico,2 NAICS represented a
major structural and conceptual departure from its U.S. predecessor, the Standard Industrial
Classification (SIC). Therefore, successful implementation of this largest-ever change in
U.S. industry classification required the Census Bureau’s Business Register,3 its data sources,
and client statistical programs to employ extraordinary measures. Those measures included
adaptations in administrative records systems, coding schemes that permitted simultaneous
classification according to old and new systems, preparatory reclassification surveys, new or
expanded inquiries on economic census collections, modified industry coding processes and
procedures, and last-resort modeling techniques. Additionally, statistical products eased the
transition for data users by providing special data presentations retrospective NAICS-based
estimates for critical time series. This paper describes those measures and concludes with a
summary of lessons learned.
2
A Comparison of NAICS and SIC
2.1
Earlier presentations have described the development of NAICS, circumstances that
prompted this landmark change in U.S. industrial classifications, the collaborative effort with
partners Canada and Mexico, and the conceptual framework upon which NAICS was built.
Ambler (1998) and the U.S. Office of Management and Budget (1998, 2002) provide
excellent summaries on these subjects. Further, the NAICS pages of the Census Bureau’s
website have links to a series of papers describing the principles that guided the design of
NAICS and to U.S. Federal Register notices that presented NAICS proposals for public
comment. The present paper will not repeat the ample background material on NAICS
development; instead, it will highlight a few key differences between the SIC and NAICS
that affected the nature and magnitude of the NAICS implementation effort.
1
2
3
This paper reports the results of research and analysis undertaken by Census Bureau staff. It has undergone
a Census Bureau review more limited in scope than that given to official Census Bureau publications. This
report is released to inform interested parties of ongoing research and to encourage discussion of work in
progress.
Principals in the three-nation collaboration were Statistics Canada; Mexico’s Instituto Nacional de
Estadística, Geografía e Informática (INEGI); and the U.S. Office of Management and Budget through its
Economic Classification Policy Committee.
The Business Register formerly was known as the Standard Statistical Establishment List or SSEL.
1
2.2
The Census Bureau’s statistical programs have been through several SIC revisions
since that classification system was introduced near the end of the 1930s.4 Those revisions,
however, have been evolutionary, leaving the foundation and structure of the SIC intact. In
contrast, the 1997 transition to NAICS was revolutionary.
Table 1. Structural Comparison of NAICS and SIC.
OLD
NEW
U.S. Standard Industrial Classification–1987
Divisions5
Major
Code Groups Title
Agriculture, Forestry, and
A 01-09
Fishing
B 10-14 Mining
C 15-17 Construction
D 20-39 Manufacturing
Transportation,
E 40-49 Communications and Public
Utilities
F 50-51 Wholesale Trade
Finance, Insurance, and Real
H 60-67
Estate
G
52-59 Retail Trade
North American Industry Classification System–1997
No of U.S.
5
Sectors
Industries
No of
IndusNew6 Total
tries Code Title
Agriculture, Forestry, Fishing and
58 11
20
64
Hunting
31 21
Mining
0
29
26 23
Construction
3
28
459 31-33 Manufacturing
79 474
22
Utilities
6
10
67
48-49 Transportation and Warehousing
28
57
69 42
52
53
53
44-45
64
72
51
54
I
70-89 Services
150
56
61
62
71
81
J
K
Total
4
5
6
[No SIC counterpart; classified
in the divisions of establishments managed.]
91-97 Public Administration
99
Unclassifiable
– 55
Wholesale Trade
Finance and Insurance
Real Estate and Rental and Leasing
Retail Trade
0
23
15
17
69
42
24
72
Accommodation and Food Services
10
15
Information
Professional, Scientific, and Technical
Services
Administrative and Support and Waste
Management and Remediation Services
Educational Services
Health Care and Social Assistance
Arts, Entertainment, and Recreation
Other Services (except Public
Administration)
20
34
28
47
29
43
12
27
19
17
39
25
19
49
1
3
Management of Companies and
Enterprises
27 92
Public Administration
–
[No NAICS counterpart.]
1,004
Total
2
–
29
–
1,17
358
0
The SIC was revised most recently for 1987.
Table 1 reorders SIC Divisions and NAICS Sectors slightly to improve alignment for side-by-side
comparison.
“New” industries are those defined separately for the first time by NAICS 1997. The counts shown allocate
new industries to NAICS Sectors.
2
7
$
First, NAICS introduced industrial classifications that are based on a consistent
production-oriented (supply-side) concept: specifically, NAICS industries group
economic activities that use like processes to produce goods or services. This
contrasts with the SIC, which was an ad hoc mixture of production-oriented and
market-oriented (demand-side) industries.7 The distinction between retail trade and
wholesale trade illustrates how this difference in underlying concept affects
classifications. According to NAICS, the principal differences between these sectors
are defined in terms of production processes: establishments classified in retail trade
are open to the public, attract customers through location and advertising, and
generally display merchandise; on the other hand, establishments classified in
wholesale trade usually operate from a warehouse or office, display little or no
merchandise, and do not advertise to the general public. But according to the SIC,
the distinction generally was based on class of customer: under the old system, retail
establishments sold mostly to household consumers and individuals, whereas
wholesale establishments sold mostly to industrial, commercial, professional,
institutional, farm (for production), and government customers.
$
NAICS also introduced a completely new system of industry codes. As shown by
Table 1, above, NAICS took a clean-slate approach, so code assignment has no
similarity to the SIC, even at the highest level. Moreover, NAICS codes differ in
length and structure compared to SIC codes. In NAICS, top-level sectors have 2-digit
codes, second-level subsectors have 3-digit codes, third-level industry groups have
4-digit codes, and NAICS industries (the level intended for North American
comparability) have 5-digit codes; additionally, NAICS permits each of the North
American participating countries to identify more detailed national industries using
6-digit codes. Beyond that, the Census Bureau supplements the NAICS code for U.S.
industries with a 2-digit subindustry suffix for internal use only (e.g., to identify
emerging industries), giving an extended processing code with a total of 8 digits..
This contrasts with the SIC, where top-level divisions had alphabetic codes A – J,
second-level major groups had 2-digit codes, third-level industry groups had 3-digit
codes, and industries had 4-digit codes. Here again, the Census Bureau supplemented
the basic SIC industry code with a 2-digit subindustry suffix for internal use, giving
an extended processing code with a total of 6 digits.
$
NAICS and the SIC are further separated by the fundamental structural differences
that Table 1 also illustrates. As shown there, NAICS has 20 top-level sectors,
whereas the SIC had only 10 top-level divisions (plus a final class for unclassifiable
establishments). The 10 sectors added by NAICS represent a disaggregation and
reorganization of top-level classes for services-producing industries. Most notably,
SIC Division I–Services was subdivided, with its major components going to:
NAICS Sector 51–Information; Sector 54–Professional, Scientific, and Technical
Services; Sector 56–Administrative and Support and Waste Management and
Remediation Services; Sector 61–Educational Services; Sector 62–Health Care and
Social Assistance; Sector 71–Arts, Entertainment, and Recreation; Sector 81–Other
Services (except Public Administration), and the Accommodation subsector of Sector
72–Accommodation and Food Services.
Market-oriented industry classifications group economic activities based on their production of goods or
services that have similarities in use, belong together, or are used together for some purpose.
3
$
3
Finally, Table 1 shows that NAICS has 1,170 industries overall, and the SIC had
1,004 industries, giving NAICS a net gain of 166.8 Contributing to this net gain,
NAICS has 358 industries8 that are defined separately for the first time, some 70
percent of which are in the services-producing sectors. Further, NAICS makes
substantial revisions to the definitions of some 330 industries8 compared to SIC
counterparts. The NAICS pages of the Census Bureau’s website present
comprehensive NAICS-to-SIC and SIC-to-NAICS concordance tables that detail the
changes introduced by NAICS.
Implementation Strategies
3.1
Mesenbourg (1996) describes U.S. plans for NAICS implementation as they stood in
the latter part of 1996. Generally, the Census Bureau followed the broad outlines of that
account, particularly with respect to schedules for phased implementation by administrative
records suppliers, other U.S. statistical agencies, and the Census Bureau’s statistical
programs. However, it was necessary to revise some of the collection and processing
particulars as the funding picture became more firm and as we determined requirements in
more detail.
3.2
The Census Bureau’s goals for NAICS implementation were very similar to those
outlined by MacDonald (1995). First, we planed to incorporate the new classification system
into the Business Register during the course of a single reference period, and we chose the
first practical period following the completion and approval of NAICS—i.e. calendar year
1997. Second, we strived to make the transition as complete and accurate as possible. Many
of the agency’s economic programs, including sensitive business cycle indicator surveys, rely
on the Business Register for sampling frames, and their movement to NAICS depended on
clean, high-quality implementation by the register. Third, we needed to minimize cost. We
made the change to NAICS during a time of very tight Federal budgets, and our initiatives to
secure additional appropriations for the purpose of supporting this effort generally were
underfunded or unfunded. Fourth, we needed to minimize response burden on businesses.
The U.S. Office of Management and Budget has oversight authority under the
U.S. Paperwork Reduction Act and limits the number of burden hours that statistical
collections can impose; more important, we do not want to undermine the goodwill that
contributes to prompt and accurate response by most businesses. Finally, we thought it was
important to ease the transition for data users. The development of NAICS responded to
changes in the economy and evolving user needs by introducing the first fundamental
reorganization of U.S. industrial classifications in nearly 60 years. As a result, significant
breaks in statistical time series were inevitable, so we made special efforts to assist data users
in bridging those breaks. In particular, we published data for the 1997 reference period on
both NAICS and SIC bases, we prepared special data presentations to showed the
SIC composition of NAICS industries and vice versa, and we have been developing
retrospective NAICS-based estimates for critical time series.
3.3
A central element in the Census Bureau’s NAICS implementation strategy was its
reliance on the 1997 Economic Census as the principal vehicle for collecting information
needed to assign new classifications and for introducing NAICS-based industry statistics.
This approach followed a tradition that has proved the economic census to be the agency’s
8
These figures are for NAICS 1997. There is a NAICS 2002 revision that adds U.S. industries and brings the
total to 1,179.
4
most effective means for implementing revisions to the industrial classification system. This
is true for at least four reasons. First, the census is our most broad-based and comprehensive
collection; it is a complete enumeration of the establishments in covered industries.9 Second,
the economic census and the Business Register are tightly integrated; census data flow
through the register and are an important source of updates. Third, the economic census
collects a rich variety of specialized content, including attributes that are important for
assigning accurate industrial classifications—far more data of this type than the Census
Bureau’s other economic collections. And finally, the economic census produces the Census
Bureau’s most extensive and detailed industry statistics, which are optimal for introducing an
updated picture of the economy according to a new classification system.
3.4
A second important element in the Census Bureau’s implementation strategy was a
classification scheme that permitted us to identify each establishment’s industry according to
both the new and the old systems for the 1997 reference period. Such an approach was
essential to tabulating economic census industry statistics on both NAICS and SIC bases and
to preparing other data presentations that would ease the transition for data users . To
develop such a classification scheme, we first needed to establish a set of
industry/subindustry classes that could be translated unambiguously to discrete NAICS and
SIC industries. Generally, this required us to identify the components of each SIC industry
that translated to distinct NAICS industries and the components of each NAICS industry that
translated to distinct SIC industries. The result was a set of transitional classifications that
had nearly twice as many industry/subindustry classes as were present in either NAICS or the
SIC. Second, we needed a coding scheme to represent the transitional classifications. At
least two approaches were possible here: we could have maintained two codes for each
establishment, one NAICS-based and the other SIC-based, or we could have maintained a
single hybrid code for each establishment, adding subindustry detail wherever needed to
permit derivation of the corresponding NAICS and SIC industries. The Census Bureau chose
the latter course because we had used it successfully for previous revisions to the industrial
classification system and because the Business Register database in place at the time did not
make it easy to store a second industry code for each establishment.10 Further, the
transitional codes used during NAICS implementation had a SIC-based root because old
classifications were the starting point for the transition to NAICS; because the Census
Bureau’s annual, quarterly, and monthly economic surveys required SIC-based classifications
9
10
Economic census coverage excludes: NAICS Sector 11–Agriculture, Forestry, Fishing and Hunting (the
U.S. Agriculture Department’s National Agricultural Statistics Service conducts a separate Census of
Agriculture that covers NAICS 111–Crop Production and NAICS 112–Animal Production); NAICS 481111
Part–Certificated Passenger Air Carriers; NAICS 4821–Rail Transportation; the U.S. Postal Service (in
NAICS 491–Postal Service); NAICS 525 except 52593–Funds, Trusts, and Other Financial Vehicles except
Real Estate Investment Trusts (REITs; the census does cover REITs); NAICS 6111–Elementary and
Secondary Schools; NAICS 6112–Junior Colleges; NAICS 6113–Colleges, Universities, and Professional
Schools; NAICS 8131–Religious Organizations; NAICS 81393–Labor Unions and Similar Labor
Organizations; NAICS 81394–Political Organizations; NAICS 814–Private Households; and NAICS Sector
92–Public Administration. These industries are out-of-scope to most of the Census Bureau’s other economic
programs as well. The Business Register has tax reporting units for business/originations that operate
exclusively in out-of-scope industries but generally does not identify establishments associated with those
tax reporting units.
We have since completed a Business Register redesign, and the new database has locations for storing both
old and new industry codes during a revision to the industrial classification system.
5
from the register until they made their transitions to NAICS between 1998 and 200111; and
because existing economic census collection and processing systems were set up to use
extended 6-digit SIC-based processing codes that could accommodate the required
subindustry detail. Since these modified SIC codes served to bridge the gap between NAICS
and SIC, we referred to them as “bridge SICs”—a term that will name them in discussion that
follows.
Table 2a. An Illustration of Relationships between SIC and NAICS Industries/Subindustries
and the Use of Transitional Bridge SICs
OLD
Standard Industrial Classification—1987
Code
Title
NEW
Bridge North American Industry
Classification System—
SIC
1997
Code Code Title
Architectural, Engineering, and Related
Services
871200 541310 Architectural Services
5413
8712
0781 (Part)
8748 (Part)
8711
7389 (Part)
7389 (Part)
8713 (Part)
1081 (Part)
1382 (Part)
1481 (Part)
7389 (Part)
8713 (Part)
8734 (Part)
Architectural Services
Landscape Counseling and Planning
(except Horticultural Consulting)
Business Consulting Services, NEC
(Urban Planners and Industrial
Development Organizations)
Engineering Services
Business Services, NEC (Drafting
Services)
Business Services, NEC (Home and
Building Inspection Services)
Surveying Services (Geophysical
Surveying)
Metal Mining Services (Geophysical
Surveying and Mapping)
Oil and Gas Field Exploration Services
(Geophysical Surveying and Mapping)
Nonmetallic Minerals Services, Except
Fuels (Geophysical Surveying and
Mapping)
Business Services, NEC (Map Making
Services)
Surveying Services (except
Geophysical Surveying)
Testing Laboratories (except Veterinary
Testing Laboratories)
078120
541320 Landscape Architectural Services
874820
871100 541330 Engineering Services
738913 541340 Drafting Services
738912 541350 Building Inspection Services
871320
108120
138220
541360
Geophysical Surveying and Mapping
Services
541370
Surveying and Mapping (except
Geophysical) Services
148120
738909
871310
873410 541380 Testing Laboratories
Table 2b. An Illustration of Relationships between SIC and NAICS Industries/Subindustries
and the Use of Transitional Bridge SICs
OLD
Standard Industrial Classification—1987
Code
Title
Metal Mining Services
Metal Mining Services (Except
1081 (Part)
Geophysical Surveying Services)
NEW
Bridge North American Industry
Classification System—
SIC
1997
Code Code Title
1081
11
108110 213114 Support Activities for Metal Mining
The Business Register maintained bridge SIC codes (which translate directly to NAICS codes) through the
end of its 2001 reference period and replaced them with true NAICS codes for 2002 and subsequent
reference periods. This change coincided with implementation of a redesigned Business Register database.
6
Table 2b. An Illustration of Relationships between SIC and NAICS Industries/Subindustries
and the Use of Transitional Bridge SICs
OLD
Standard Industrial Classification—1987
Code
Title
Metal Mining Services (Geophysical
1081 (Part)
Surveying Services)
NEW
Bridge North American Industry Classification System—
SIC
1997
Code Code Title
Geophysical Surveying and Mapping
108120 541360
Services
3.5
Table 2a, above, uses NAICS Industry Group 5413–Architectural, Engineering, and
Related Services to illustrate the relationships between SIC and NAICS
industries/subindustries and the use of bridge SIC codes to provide an unambiguous mapping
of those relationships. Table 2b shows similar relationships, this time from the
complementary perspective of a whole SIC industry that sent one of its parts to a NAICS
industry represented in Table 2a—i.e., to NAICS 541360–Geophysical Surveying and
Mapping Services. Together, these tables illustrate important characteristics of the bridge
SIC scheme and associated codes used in the Census Bureau’s NAICS implementation:
 Many SIC industries were divided into subindustry classes, as identified by the
“(Part)” designation in the first column of each table, and these parts went to different
NAICS industries. For example, Table 2a shows three parts that came from SIC
7389–Business Services, NEC12 (in fact, SIC 7389 was subdivided into 36 parts; the
33 parts not shown in Table 2a went to NAICS industries outside NAICS Industry
Group 5413); also, Table 2b shows two parts that made up SIC 1081–Metal Mining
Services.
 Many NAICS industries also consisted of subindustry classes, and these parts came
from different SIC industries. For example, Table 2a shows that NAICS 541360–
Geophysical Surveying and Mapping Services had four such parts, one for each of its
SIC subindustry components.
 In some cases, parts of a SIC industry went to NAICS industries in different sectors.
For example, Table 2b shows that SIC 1081–Metal Mining Services had parts going
to both NAICS Sector 21–Mining and NAICS Sector 54–Professional, Scientific, and
Technical Services.
 In some cases, parts of a NAICS industry came from SIC industries in different
divisions. For example, Table 2a shows that NAICS 541360–Geophysical Surveying
and Mapping Services had one part that came from SIC Division I –Services and three
parts that came from SIC Division B–Mining.
 More generally, it is possible to find examples where the relationship between SIC
and NAICS industries was 1:1, 1:many, many:1, or many:many. Therefore, the
bridge SIC scheme needed to provide unambiguous translation between NAICS and
SIC for all these possibilities.
 Bridge SIC codes shown in the third column of each table had a total of 6-digits.
They consisted of a 4-digit root that identified the base 1987 SIC industry and, where
applicable, a 2-digit subindustry suffix that uniquely identified parts going to different
NAICS industries (where there were no such subindustry parts, the 2-digit suffix
was ‘00’; in that case, the entire SIC industry went to a single NAICS industry).
Hence, for each industry/subindustry class identified by the bridge SIC scheme, it was
12
NEC – Not Elsewhere Classified
7
always possible to identify the originating SIC industry by examining the code’s 4digit root and the corresponding NAICS industry by referring the full 6-digit code to a
concordance table that converted it to one and only one classification under the new
system. For example, Table 1 shows that bridge SIC 874820 translated to SIC 8748–
Business Consulting Services, NEC and to NAICS 541320–Landscape Architectural
Services.
3.6
Extending the SIC-to-NAICS relationships shown by the foregoing illustrations to the
full breadth of the bridge SIC classification scheme, there were:
 614 SIC industries that translated to a single NAICS industry (subindustry
suffix = ‘00’); establishments in these industries could be converted directly to the
corresponding NAICS industry, and no collection of reclassification information was
required.
 390 SIC industries that consisted of two subindustry parts or more, each of which
went to a different NAICS industry; these industries required collection of
reclassification information to determine subindustry parts that went to different
NAICS industries.
 1,357 subindustry parts, total, across the 390 SIC industries described just above (all
these subindustry parts had a subindustry suffix ≠ ‘00’)
 80 SIC industries of the 390 described above that had subindustry parts going to
NAICS industries in different sectors.
 401 NAICS industries that had subindustry parts coming from two SIC industries or
more.
 1,971 bridge SIC classes, total.
4
Administrative Records
4.1
The Census Bureau relies on the administrative records other Federal agencies as lowcost, low-burden, high-quality sources of information for maintaining the business register
and for representing smaller single-establishment enterprises in the economic census . These
records are important for identifying new businesses and for providing a stream of updated
size and activity measures for continuing businesses. Additionally, administrative records
are an important source of industrial classifications, particularly for new businesses and for
the smaller single-establishment business that do not receive an inquiry from the economic
census.
4.2
For the most part, industrial classifications from administrative records did not play a
significant role in the Business Register’s implementation of NAICS because supplying
agencies’ introduction of the new classification system lagged the Census Bureau’s by a year
or more. As a result, the Census Bureau needed to rely almost entirely on classifications
derived from its own collections, at least through the 1997 reference period when NAICS
implementation occurred. At the same time, it was important for supplying agencies to make
the transition as soon as possible because Business Register operations for 1998 and later
needed reliable administrative sources of NAICS classifications.
4.3
The U.S. Treasury Department’s Internal Revenue Service (IRS) led the way by
introducing a NAICS-based “Principal Business Activity” inquiry on business income tax
forms for tax year 1998. This timing meant
8
that the Census Bureau started receiving NAICS classifications from this source in February
of 1999. On the positive side, the IRS is by far the largest supplier of administrative records
used in Business Register maintenance, so their prompt implementation of NAICS was
important. Less favorably, the IRS’ business income tax returns use a self-coding method by
which the taxpayer is referred to a list of short industry descriptions in an instruction booklet
(the IRS Forms and Publications web page noted in References at the end of this paper has
examples for tax year 2003), is instructed to select the description that best fits the business
covered by the tax return, and is asked to record the corresponding code on the tax form.
Because it is impossible for the instruction booklet to list descriptions for all 1,170 U.S.
NAICS industries and for the taxpayer to locate the best fit from such a large array, the tax
forms’ approach is to list a selected group of 300 – 425 NAICS categories, depending on tax
form type. The majority of those categories are 4-digit NAICS Industry Groups and, less
often, 3-digit NAICS Subsectors; only a relatively small number of 6-digit U.S. NAICS
industries appear for activities that occur with relatively high frequency among businesses
that use a particular tax form type. As a result of the limitations associated with this selfcoding approach, NAICS codes supplied by the IRS often have less than the 6-digit industry
detail that the Business Register requires, and the codes sometimes are missing; also, earlier
evaluations by the Census Bureau have suggested that taxpayer self coding (SIC-based) is
less accurate than other approaches.
4.4
The Social Security Administration (SSA) also supplies industrial classifications to
the Census Bureau. Important primarily for recent entries, these classifications are based on
information that businesses report when they file IRS Form SS-4, “Application for Employer
Identification Number”13 (the IRS Forms and Publications web page has an example). To
promote timely NAICS implementation by this key supplier, the Census Bureau licensed a
computer-assisted NAICS coding tool known as the Coding Assist and Ruling Request
System14 from Statistics Canada and made it available for use by the staff at the SSA. This
made it possible for the agency to make a more timely transition; to begin assigning NAICS
codes to Forms SS-4 received after January 1, 1999; and to deliver the first such codes to the
Census Bureau during the second quarter of that year. Although this was too late to be
helpful for our 1997 NAICS implementation, the SSA’s move to the new classification
system has been important for continuing operations. Unlike the industry codes obtained
from the IRS’ business income tax returns, those assigned by the SSA staff represent 6-digit
U.S. NAICS industries almost exclusively; further, the quality generally is quite high.
4.5
Finally, the U.S. Labor Department’s Bureau of Labor Statistics (BLS) supplies
industrial classifications from their Longitudinal Establishment Database, which is based on
the administrative records and supplementary statistical collections of the joint Federal/State
unemployment insurance system. NAICS implementation for this business list was carried
out in phases that spanned three years. The vehicle for collecting required classification
information was the program’s Annual Refiling Survey. This regular collection usually
divides the universe of business establishments into three annual panels, approximately equal
in size, and canvasses the panels in a three-year rotation to verify/update industrial
classifications. The timetable for NAICS implementation in the BLS’ business list was as
follows: (i) beginning October 1997, the program used an automated process to recode
13
14
The Employer Identification Number is the Federal taxpayer identification number for most businesses and
other organizations (sole proprietorships excepted); some other administrative records systems also
incorporate this identifier.
Since superseded by the Industry Classification Coding System (ICCS).
9
establishments that could be converted directly from SIC to NAICS; (ii) beginning October
1998, the program directed an Annual Refiling Survey collection to establishments with 50
employees or more, selected smaller establishments, and unclassified establishments, together
accounting for about half of those that had not been converted directly; and (iii) beginning
October 1999, the agency directed an Annual Refiling Survey collection to all remaining
establishments that did not yet have a NAICS code assigned and to auxiliary establishments.
Each collection included up to three nonresponse follow-up contacts in an effort to produce
high response rates. At the conclusion of all three phases, about 72 percent of the
establishments on the BLS’ business list had been converted successfully, and a modeling
procedure was used to impute NAICS classifications for the balance (see Mikkelson et al.,
2000, for details). Results of each phase in the BLS’ NAICS implementation updated their
business list early in the third quarter of the following year, and the newly assigned NAICS
codes then became available to the Census Bureau during the regular quarterly exchange of
classification information scheduled for October. Hence, NAICS classifications were
available for some establishments on the BLS business list as early as October 1998 and for
all establishments on the list by October 2000. Here again, the NAICS codes represent 6digit U.S. NAICS industries, and the quality is quite high.
5
Preparatory Reclassification Collections
5.1
The Census Bureau conducted pre-census reclassification or “refiling” collections to
help prepare for the transition to NAICS. Our focus was establishments in the 80 SIC
industries that had parts going to NAICS industries in different sectors. Returning to the
illustration above, Table 2b gives an example of such an industry: SIC 1081–Metal Mining
Services had a part going to NAICS Sector 21–Mining and a part going to NAICS Sector 54–
Professional, Scientific, and Technical Services. It was most important to determine
NAICS Sector for establishments in industries such as this one because the 1997 Economic
Census used 454 questionnaires, each of which had content tailored to a fairly narrow group
of related industries. Those questionnaires were more effective when an establishment
received one that was appropriate to its principal activity, and since content varied markedly
from sector to sector, it was particularly important for an establishment to receive a
questionnaire for the correct sector.
5.2
The refiling survey for single units (single-establishment enterprises) was a mail
collection directed to 215,829 establishments in December 1996. The collection instrument
for the single unit refiling survey was one standard letter-size (8.5- by 11-inch) sheet of paper
with an address label block and a short cover letter on the front and classification inquiries on
the back. There were seventeen versions of the classification inquiries that were tailored to
establishments in as many groupings of related industries from the set of 80 SICs that had
been targeted for refiling. These inquiries were designed to determine an establishment’s
subindustry class according to the bridge SIC scheme described earlier. Attachment A shows
an example of the collection instrument—in particular, the version that was sent to
establishments in SIC Industry Group 871–Engineering, Architectural, and Surveying
Services (all seventeen versions are available on the Census Bureau’s website as shown in
References).
5.3
The refiling of multiunits (establishments of multi-establishment enterprises) was
done in connection with the Census Bureau’s annual register proving collection for multiestablishment enterprises, the Company Organization Survey. The usual procedure for
constructing this survey’s collection panel
10
always targets large, complex enterprises and additionally targets others that are likely to
report changes in establishment make-up or company organization based on an inference
from administrative records indications. For the 1996 reference period, this selection
procedure was modified; it selected large, complex enterprises, as before, and it additionally
selected companies that had establishments in any of the 80 SIC industries that had been
targeted for refiling. The result was a survey panel of 50,698 enterprises, which operated
some 1.1 million establishments (the total multiunit population of the Business Register had
180,000 enterprises and 1.5 million affiliated establishments). Of the enterprises selected for
the 1996 panel, 17,572 were included only because they had establishments in the SIC
industries that had been targeted for refiling. Overall, the panel had 67,973 multiunit
establishments targeted for refiling.

01-2345678
Enter code
from Insert K

XYZ Enterprises
21
Any Mining Services Company
123
456 Any Street
Any City
9876543210
AB
00
108100
10
43210
40
000
Figure 1. Illustration of Establishment Inventory Listing from the 1996 Report of
Organization
5.4
The Company Organization Survey collection instrument used the format illustrated
in Figure 1, above, to list an inventory of establishments for each enterprise to which it was
directed. It then requested updates to the inventory, including additions for openings,
acquired establishments, or mergers; deletions for closings, sold establishments, or spinoffs/break-ups; and updates to information listed for each establishment’s Federal employer
identification number (EIN), major activity (industrial classification), primary and secondary
name, store or plant number, and physical location address. Finally, the instrument collected
each establishment’s end-of-year operating status and standard employment and payroll
measures.
11
5.5
For 1996, this inventory list was modified slightly to facilitate collection of updated
classifications for establishments that had been targeted for refiling. They were identified by
a symbol () printed on the left-hand side of the establishment’s entry in the inventory list
(just above a sequence number, which is shown as ‘21’ in the illustration), and the usual
major activity description was replaced by an instruction that referred the respondent to an
insert. There were eleven versions of the “Industry Classification Assignment” insert, and
each version listed descriptions of bridge SIC subindustry classes for a grouping of related
industries from the set of 80 SICs that had been targeted for refiling; Attachment B shows an
example of an insert—in particular, the version that was sent to establishments in
SIC Industry Group 871–Engineering, Architectural, and Surveying Services. Since it was
possible for a heterogeneous enterprise to receive two such inserts or more, the instruction in
the inventory listing directed the respondent to a specific insert, identified by an alphabetic
designation (A – K), that was appropriate to each targeted establishment’s SIC. The insert
then asked the respondent to identify the bridge SIC subindustry description that best fit the
establishment’s primary activity and to enter the corresponding code in the space provided on
the inventory listing.
5.6
The single unit refiling survey received a response from 88.9 percent of the
establishments in its collection panel, whereas the 1996 Company Organization Survey
received a response from 86.5 percent of the enterprises in its panel (Company Organization
Survey response rates are not available on an establishment basis, nor are they computed
separately for the refiling component of the collection). When these collections and
associated processing were complete, the Census Bureau applied resulting bridge SIC updates
to the Business Register. Additionally, there was a secondary reclassification activity for
multiunits whereby industry analysts identified selected homogeneous enterprises in the
services-producing sectors and determined bridge SICs for the establishments of those
enterprises; a batch process applied resulting bridge SIC code updates to the Business
Register as mass corrections. Updated industry codes from these refiling activities were then
available to determine appropriate assignment of questionnaires for the upcoming economic
census.
6
1997 Economic Census Collection and Processing
6.1
As noted earlier, the 1997 Economic Census was a complete enumeration of
establishments in all covered industries—some 6.4 million total. This enumeration consisted
of four main components that used differing data acquisition methods, as shown in Table 3
and described below. All census questionnaires are available on the 1997 Economic Census
Forms web page noted in References at the end of this paper.
12
Table 3. Components of the 1997 Economic Census Collection
Economic Census Component and
Standard Industrial Classification Division
Establishments with Paid Employees
Multiunits and Larger/Selected Single Units
(Standard Forms)
Construction
Mining
Manufacturing
Transportation, Communications & Utilities
Wholesale Trade
Retail Trade
Finance, Insurance & Real Estate
Services
Smaller, Partially Classified Single Units
(Sector-Specific Classification Forms)
Mining and Manufacturing
Transportation, Communications, & Utilities
Retail Trade
Finance, Insurance, & Real Estate
Services
Unclassified Single Units
(General Classification Form)
Establishments without Paid Employees
Number of Establishments
Final
Response
Not
Statistics
Mailed Responses
Rate
Mailed
6,430,633 4,929,279 4,244,023
86.1% 1,501,354
6,430,633
3,371,392
2,887,152
85.6%
639,482
25,251
377,776
293,575
521,127
1,561,195
661,388
2,350,839
131,313
14,785
217,193
117,603
458,496
1,036,337
315,423
1,080,242
105,050
12,464
180,270
100,433
381,927
891,250
273,787
941,971
80.0%
84.3%
83.0%
85.4%
83.3%
86.0%
86.8%
87.2%
1,195,151
1,062,692
88.9%
85,016
32,350
319,237
96,346
662,202
74,049
27,562
269,117
86,711
605,253
87.1%
85.2%
84.3%
90.0%
91.4%
362,736
294,179
81.1%
15,439,609
15,439,609
6.2
Multiunits and Larger/Selected Single Unit Employers—The census relied primarily
on direct collection to obtain data for multiunit establishments,15 larger single units, and a
sample of smaller single units (excluding unclassified single units of any size). The
instruments for this component were standard economic census questionnaires that collected
basic economic measures and a rich variety specialized content, including attributes that were
important for assigning accurate industrial classifications according to the bridge SIC
scheme. Generally, these questionnaires were organized by SIC Division, and each one was
tailored to a fairly narrow group of related industries within the division. Content that was
important to assigning a bridge SIC included detail of shipments, sales, receipts, or revenue
(i.e., by product, type of construction, merchandise, commodity, or service class); kind-ofbusiness; type-of-operation; materials consumed; selling characteristics; method of selling;
class of customer; employees by occupation; and other industry-specific items. In many
cases, NAICS implementation required new inquiries or substantially revised inquiries to
separately identify bridge SIC subindustry classes that went to different NAICS industries.
The Census Bureau used automated processes, known as industry coding edits, to assign an
industrial classification to each employer establishment that completed a standard census
questionnaire. While details varied somewhat for manufacturing/mining, construction, and
the services-producing sectors, editing methods generally applied a relatively complex set of
decision rules that considered the classification-relevant data noted above and industry codes
from administrative records. The edits for 1997 differed substantially from those for earlier
censuses because it was necessary to resolve distinctions among 1,971 bridge SIC classes (as
15
Some larger multiunit enterprises had the option of reporting electronically.
13
opposed to 1,004 SIC classes) and to consider new content that had been added to census
questionnaires for the purpose of supporting those decisions.
6.3
Smaller, Partially Classified Single Unit Employers—If a small single unit employer
was not selected to receive an economic census standard form and had a complete bridge SIC
(i.e., was in a SIC industry that could be converted directly to a NAICS industry), no
economic census collection was necessary; the establishment was represented in the census
by the available bridge SIC and by data from administrative records. However, if a small
single unit employer had an incomplete bridge SIC, the Census Bureau sent the establishment
a shorter, specialized classification form designed for businesses in a particular SIC Division
(divisions in the services-producing sectors had several such classification forms each, and
the forms were tailored for rather broad groupings of related industries). Generally, these
forms listed bridge SIC subindustry descriptions, and the recipient was asked to mark the
checkbox associated with the one description that best fit the establishment’s primary
activity. A variation on this approach for partially classified mining and manufacturing
establishments used one generic questionnaire format with print-on-demand bridge SIC
descriptions that varied depending on the incomplete classification available from the
Business Register. Further, many of these sector-specific classification forms had additional
classification inquiries, such as method of selling and selling characteristics items on forms
for partially classified establishments in retail trade and wholesale trade. Once this
specialized classification form was returned and a classification was assigned, the
establishment was represented in the census by data from administrative records (plus the
bridge SIC determined by means of the specialized classification form); no further collection
was necessary.
6.4
Unclassified Single Unit Employers—The census directed a general classification
form to unclassified single unit employers of any size, mostly entries that started operation
shortly before or during the census reference period. This questionnaire presented a large
array of bridge SIC industry/subindustry descriptions organized by SIC Division, and
recipients were asked to mark the checkbox associated with the one description that best fit
the establishment’s primary activity. Additional inquiries requested information on principal
sources of sales, receipts, or revenue; principal materials consumed (for manufacturers); and
class of customer. Once this general classification form was returned and a classification was
assigned, the Census Bureau examined administrative data for the establishment to determine
whether it was large enough to require completion of an economic census standard form; if
so, we assigned the industry-appropriate standard form and asked the respondent to complete
this second questionnaire. If the establishment was too small to require completion of a
standard form, it was represented in the census by data from administrative records (plus the
bridge SIC determined by means of the general classification form); no further collection was
necessary.
14
6.5
Nonemployers—The Census Bureau did not send a collection instrument of any kind
to single-establishment enterprises without paid employees. More than 15 million small
businesses of this type (average annual receipts of U.S. $38,000), mostly self-employed sole
proprietorships, were represented in the 1997 Economic Census exclusively by data from
administrative records. It should be noted that nonemployers were an exception to the use of
bridge SICs; they were classified only according to NAICS, and a separate Nonemployer
Statistics publication summarized data only on that basis—generally for sectors and
subsectors, selected industry groups, and only a few 6-digit industries (i.e., classifications for
nonemployers had considerably less industry detail than classifications for employers). The
nonemployer component of the census presented a particular challenge for NAICS
implementation because administrative records suppliers did not make the transition to the
new classification system until the 1998 reference period or later. As a result, the Census
Bureau had to apply the following special procedures to nonemployers:
16
$
For sole proprietorships (the great majority of nonemployers) that did not have a
SIC code on their 1997 tax return, we attempted to assign a classification based on
a principal activity description reported only on the tax form type that applied to
these businesses. First we used an automated procedure that parsed keywords in
the industry description, referred them to a computerized coding dictionary, and
assigned a SIC-based classification16 when there was a reliable match. If this
automated procedure did not provide a code, we referred the description to an
Industry Coding Unit (described below), where the clerical staff attempted to
assign a classification.
$
We then used a concordance table to convert SIC-based codes to a NAICS basis
for establishments in SIC industries that could be translated directly.
$
The IRS started using NAICS-based industrial classifications on 1998 business
income tax forms, and by December 1999, the Census Bureau had received 1998
tax data that were essentially complete. Following the premise that industrial
classifications for these very small businesses were reasonably stable from year to
year, we matched those 1997 nonemployer records that did not have a
NAICS code from the direct conversion procedure to their 1998 counterparts and
applied NAICS industry codes from the latter to the former.
$
Finally, for those residual nonemployers that still did not have a NAICS code, we
used a modeling procedure to impute one. This last-resort measure referred the
establishment’s SIC-based industry code to a table that gave the relative SIC-toNAICS distribution observed for the population of nonemployer establishments
for which we had classifications of both types and selected a NAICS code from
that distribution (more on modeling procedures below).
The result was SIC based because we used an existing process and coding dictionary, developed for previous
years’ data, that assigned classifications according to the old system.
15
6.6
In some cases, it was necessary for members of the Census Bureau staff to assist with
industry code assignment. Generally, this intervention occurred at the Census Bureau’s
National Processing Center (NPC) in Indiana, where the staff performed a variety of
economic census data collection and processing tasks.
$
The single unit refiling survey mailed at the end of 1996 and part of the main
census collection mailed at the end of 1997 used classification forms to collect
industry coding information for selected establishments. Respondents returned
these forms and other economic census questionnaires to the NPC. If the response
to a classification form unambiguously identified a single bridge SIC class, our
processes captured that fact and updated the Business Register with the
corresponding industry code. If, on the other hand, the response identified two
bridge SIC classes or more, consisted of a write-in industry description, or
otherwise failed to provide a straightforward answer, the staff of a NPC Industry
Coding Unit examined the form, evaluated available classification information,
and assigned the bridge SIC code that was judged to be the best fit. The staff of
this unit had two components: (i) Clerical industry coding specialists resolved
easier cases that could be classified by following fairly explicit procedures, and
their work was subject to quality assurance evaluation. (ii) Professional industry
coding specialists classified cases that were referred to them as being too difficult
for clerical resolution. Both clerical and professional components of the staff used
industry coding references to support their bridge SIC assignments and an
interactive database application to update the Business Register.
$
When a sole proprietorship business without paid employees did not report a
SIC-based principal business activity code on its 1997 tax form but instead wrote
in a description, we first applied an automated process that attempted to assign a
classification based on the description. If the automated process could not make a
reliable assignment, the nonemployer establishment was referred to the NPC
Industry Coding Unit, where members of the clerical staff examined the
description and assigned a classification whenever possible.
$
Some employer establishments that were reclassified across sector boundaries and
all employer establishments that were reclassified from an industry that was inscope to the census to one that was out-of-scope were subject to review and final
adjudication by the professional staff of the NPC Industry Coding Unit.
$
When industry coding edits could not assign a bridge SIC code, the establishment
was referred to the staff of a sector-specific NPC Problem-Solving Unit that
specialized in resolving data questions from the edits (industry coding and others).
There were several such units, and details of their operation varied somewhat
from sector to sector. Generally, they examined the census questionnaire and
other sources of classification information, considered their knowledge of the
industry, and applied expert judgment in order to assign the bridge SIC code that
fit best. In the case of larger establishments or establishments with other difficult
data questions, these problem-solving specialists might contact the business in
order to seek clarification. Here again, the units usually had a clerical component
for easier cases and a professional component for cases that were referred as being
too difficult for clerical resolution. This work was supported by industry coding
references, secondary data sources (e.g., company websites), and an interactive
16
database application for correcting census data.
$
Industry statistics from the 1997 Economic Census were subject to careful review
by the professional analytical staff at Census Bureau headquarters. Generally the
members of this staff are experts on a particular sector or smaller industry group,
and they are thoroughly familiar with larger companies that operate in their areas
of expertise. When these industry analysts prepared 1997 data for publication,
their examination sometimes identified errors in industrial classification. They
resolved those errors by correcting the bridge SIC code for each misclassified
establishment. This work was supported by historical data, macro-edits, macroanalytical review tools, secondary data sources (e.g., company websites), and an
interactive database application for correcting census data.
6.7
Statistical collections generally have some residual component for which complete
observations cannot be obtained, and the 1997 Economic Census was no exception.
Mandatory authority and repeated follow-up contacts produced an 86.1 percent final response
rate, which left a gap in the data needed to assign complete industrial classifications to all
establishments. The Census Bureau filled this gap by applying a simple statistical modeling
procedure to impute missing industry/subindustry detail. To support this procedure, first we
constructed a parameter table by isolating the subpopulation of fully classified establishments
and determining the relative distribution of units from each 2-, 3-, 4-, or 6-digit SIC17 to the
corresponding set of valid 6-digit bridge SICs. The modeling procedure then referred each
establishment’s SIC to a set of matching rows in the parameter table and selected one such
row by comparing a uniformly distributed 3-digit index18 to a set of cumulative distribution
parameters arranged in ascending sequence. The first row in which the distribution parameter
exceeded the 3-digit index gave the bridge SIC assigned to the establishment. Thus, the
resulting imputations assumed similar bridge SIC distributions for the subpopulations of
fully- and partially-classified establishments and preserved the distributions observed for
fully-classified establishments in the employer population as a whole.
6.8
Table 4a presents an example of the parameters, and Table 4b illustrates their use in
the modeling procedure.
17
18
$
The establishment in Example 1 has a 2-digit incoming code, SIC 870000. The
modeling procedure refers this SIC to the set of 5 matching rows in the parameter
table and selects the first such row where the cumulative distribution parameter
shown in the table’s second column exceeds the value represented by digits 7 – 9
of the establishment’s employer identification number (i.e., 248). Accordingly,
the establishment is assigned bridge SIC 871310.
$
The establishment in Example 2 has a 3-digit incoming code, SIC 871000, and the
procedure assigns bridge SIC 871200 (SIC 8712 has no subindustry detail, so the
bridge SIC’s subindustry suffix is ‘00’).
As noted earlier, administrative records, particularly business income tax returns, may not have provided a
complete 4-digit SIC, so some single units that were classified on that basis had 2- or 3-digit codes. There
were no 5-digit SICs. The parameter table also included complete 6-digit codes, which converted 100% to
the bridge SIC with an identical code.
This index was based on positions 7 – 9 of the establishments Federal employer identification number.
17
$
The establishment in Example 3 has a complete 6-digit incoming code, SIC
871310, and there is only one matching row in the parameter table. Accordingly,
and the procedure assigns the same code as the establishment’s bridge SIC.
Table 4a. Parameters for Bridge SIC Modeling Procedure
Example 1
Example 2
Example 3
Distribution within
SIC Code (In)
Cumulative
Percent19
Percent19
17.8%
17.8%
7.0%
24.8%
0.1%
24.9%
2.9%
27.8%
72.2%
100.0%
SIC
Code
(In)
870000
870000
870000
870000
870000
Cumulative
Distribution
Parameter
(> Index )
178
248
249
278
1000
871000
871000
871000
871000
639
890
894
1000
871100
871200
871310
871320
63.9%
25.1%
0.4%
10.6%
63.9%
89.0%
89.4%
100.0%
54133
54131
54136
54137
871100
1000
871100
100.0%
100.0%
54133
871200
1000
871200
100.0%
100.0%
54131
871300
871300
37
1000
871310
871320
3.7%
96.3%
3.7%
100.0%
54136
54137
871310
1000
871310
100.0%
100.0%
54136
871320
1000
871320
100.0%
100.0%
54137
Bridge
SIC Code
(Out)
871100
871200
871310
871320
Etc.20
Corresponding
NAICS Code19
54133
54131
54136
54137
Etc.20
Etc.
Table 4b. Illustrations of the Bridge SIC Modeling Procedure
Example
1
ID
0123456248
2
3
0123456789
0123459876
EIN
(Index based on SIC Code
positions 7 – 9) (In)
870000
123456248
871000
123456789
871310
123459876
Bridge SIC
Code (Out)
871310
871200
871310
6.9
A variation on this modeling procedure applied to nonemployer establishments. In
this case, however, the parameter table’s third column contained NAICS codes, and the
distributions were based on the subpopulation of nonemployers that had both SIC and NAICS
codes, the latter obtained from 1998 tax data. As noted earlier, the 1997 Economic Census
presented nonemployer statistics only on a NAICS basis.
19
20
This column does not exist in the actual parameter table. It is added here to provide context and improve the
illustration.
This row represents a group of discrete classes in SIC 87 except 871 and accounts for 72.2 percent of the
establishments in SIC 87. It is collapsed to a single category to simplify the illustration and conserve space.
18
7
1997 Economic Census Data Presentation
7.1
A major revision to the industrial classification system, such as the Census Bureau’s
implementation of NAICS, necessarily causes a break in statistical time series. To mitigate
the effects of this break, the Census Bureau prepared special presentations of 1997 Economic
Census data that were designed to assist data users in making the transition. These
presentations depended on the bridge SIC scheme that allowed us to classify each
establishment according to both NAICS and SIC. The statistical publications described
briefly below are available on the Census Bureau’s website, as listed in References at the end
of this paper.
8
$
Comparative Statistics—This report allowed data users to compare 1997 and
1992 Economic Census data on a 1987 SIC basis. Specifically, it presented
detailed industry statistics for both reference periods in a side-by-side format with
separate summaries for the United States, each of the 50 States, and the District of
Columbia. Attachment C provides an example of this presentation for selected
industries used in earlier illustrations. Since microdata records from the 1992
Economic Census did not include content needed to reclassify those
establishments according to the bridge SIC scheme, it was not possible for us to
prepare a complementary presentation that compared 1997 and 1992 census data
on a NAICS basis (but see the section below on Time Series Data for a discussion
of efforts to recast pre-1997 data on a NAICS basis).
$
Bridge Between NAICS and SIC—This report detailed the relationships between
NAICS and SIC industries. One tabulation presented industry statistics on a
NAICS basis and showed the composition of each NAICS industry in terms of
1987 SIC industries. Conversely, a second tabulation presented industry statistics
on a 1987 SIC basis and showed the composition of each SIC industry in terms of
NAICS industries. Both tabulations summarized data for the United States; no
further geographic detail was available. Attachment D provides an example of
this data presentation for selected industries used in earlier illustrations.
Time Series Data
8.1
As mentioned earlier, the change from SIC to NAICS created serious concern among
data users. A diverse community of users including the Bureau of Economic Analysis
(BEA), the Federal Reserve Board of Governors (FRB) and the National Association of
Business Economists (NABE) make extensive of use of economic time series data that are
either directly sourced from the Census Bureau or are constructed from our data. These
series include industry output, employment, productivity, investment, capital utilization, and
industrial production indices to name a few. In addition to these users of publicly available
industry time series data, there is a growing cadre of researchers from government and
academic institutions that utilize confidential Census Bureau microdata. This class of users is
particularly concerned with longitudinal analysis and, therefore, need consistent industrial
classification schemes over time.
19
8.2
The Census Bureau published the 1997 Economic Census data under both
classification schemes and provided a detailed SIC-NAICS concordance. While useful, these
measures offer little comfort to users of industry level time series. Both SIC and NAICS are
used to classify establishments, whose data are then aggregated up to form industry level
statistics. There is not a one-to-one mapping of SIC codes to NAICS codes, except for special
codes developed for the 1997 Economic Census. Thus, for any 4 digit SIC, some of its
constituent establishments will be coded to one 6-digit NAICS industry and some to another.
Many establishments engage in multiple activities that can further complicate industry
coding, especially over time. Thus, even with a detailed concordance one is not ensured of
being able to produce accurate NAICS industry level time series from SIC based historical
data. One way of getting around these problems for industry data is to use the 1997 SICNAICS bridge to compute the shares of 1997 activity (using a measure such as sales,
employment, or payroll), in a given SIC that are reclassified into various NAICS codes.
These shares can then be used to “re-weight” SIC based industry level statistics. While this
strategy may work going back a few years from 1997, it becomes more questionable for
longer time series. Consider the following example taken from Bayard and Klimek (2003).
Table 5. Sample Bridge Between SIC 3578 and NAICS
NAICS
333313
334119
Description
SIC 3578 – Calculating & Accounting
Machines, Except Electronic Computers
Office Machinery Manufacturing
Other Computer Peripheral Equipment
Manufacturing
Value of
Shipments
($1,000)
Share of
Shipments
Paid
Employees
Share of
Employment
2,014,806
100%
7,683
100%
144,380
7%
966
13%
1,870,426
93%
6,717
87%
Source: Bayard and Klimek (2003)
8.3
Clearly, these shares become less appropriate the farther back in time one applies
them to SIC 3578 data. Namely, we would expect that NAICS 333313, which includes
typewriters and mail handling equipment, to be much more prominent in 1975 than it is in
1997. Likewise, we would expect NAICS 334119, which includes computer printers,
monitors, keyboards, etc., to be less prominent in 1975 relative to 1997.
8.4
It is possible, however, to use the original microdata files to more accurately recode
historical data on a NAICS basis. An ongoing project at the Census Bureau’s Center for
Economic Studies (CES) does just that. Bayard and Klimek (2003) utilize several techniques
to assign each establishment record in historical (pre-1997) economic censuses the best
NAICS code possible. Their approach has been used on manufacturing data in order to recast
the FRB’s Indices of Industrial Production and Capacity Utilization on a NAICS basis.
These are both intensely watched “Leading Economic Indicators” that utilize data from the
Census Bureau and other sources.
8.5
The methodology employed by Bayard and Klimek uses the most detailed and
accurate information first. They make use of the 1997 SIC-NAICS bridge and longitudinal
data files maintained at CES. They reclassify all establishments in the Censuses of
Manufactures going back to 1963. They use a recursive procedure. Namely, they use 1997
information to reclassify 1992 establishments. Likewise, they use 1992 information to
reclassify 1987 and so on.
20
8.6
In manufacturing, SIC and now NAICS codes are assigned by the Census Bureau
using detailed information on the products produced at an establishment. Bayard and
Klimek, therefore, first attempt to assign establishments to NAICS codes using detailed
product data available each economic census year. This is the most accurate method of
assigning manufacturing establishments a NAICS code. Unfortunately, not all establishment
records in historical files meet the information requirements for this method. For these
establishments, the next preferred solution is to take the subset in SIC industries that have a
one-to-one mapping to a NAICS industry and apply the corresponding NAICS code. For
establishments that are not in these one-to-one SIC-NAICS industries, longitudinal
establishment data prove very useful. In cases where establishments in the census year being
reclassified (say 1987) still exist in 1997 and do not change SIC codes over that period,
Bayard and Klimek assign the NAICS code given those establishments in the 1997 bridge.
A statistical model was used to assign NAICS codes to the remaining establishment records.
8.7
The Bayard and Klimek methodology worked very well for the manufacturing sector
and data products that rely on it, such as the FRB’s re-cast Industrial Production Index, have
been well received by data users. Work is beginning now to re-classify other sectors of the
economy using this methodology21. The hope is that all employer establishments that have
operated in the U.S. private non-farm economy since 1975 will eventually have NAICS codes
assigned to them for each year of operation22. Unfortunately, most sectors lack the detailed
product data that proved so useful in re-coding the manufacturing sector back to 1963. Thus,
sectors such as services, retail and wholesale trade, and others will be re-coded with less
precision.
9
Lessons Learned
9.1
The Census Bureau’s implementation of NAICS was quite successful. As noted
earlier, this transition was a much larger challenge than earlier SIC revisions had been.
Nevertheless, the agency achieved the goals it had set for completely incorporating the new
classification system into the Business Register for the 1997 and subsequent reference
periods and for introducing NAICS to data users by means of comprehensive and detailed
statistical products from the 1997 Economic Census. Overall, our implementation strategy
and specific methods worked very well; however, there was room for improvement in at least
two respects.
9.2
First, there were relatively small imperfections in our introduction of NAICS. The
most significant were minor discrepancies between the definition and interpretation of some
industries according to the final NAICS 1997 specification and classifications that
1997 Economic Census collections could support. These discrepancies occurred because the
magnitude of the changes introduced by NAICS required additional time and care for
specifying the new system, completing detailed industry definitions, making decisions about
the correct industry placement of some 35,000 specific business activities, and completing
final NAICS documentation. As a result, NAICS development teams continued this work
21
22
A variant of this methodology was used to reclassify establishments in the 1992 Censuses of Wholesale and
Retail Trade.
Namely, the plan is to put NAICS codes on all establishment records in the Census Bureau Longitudinal
Business Database (LBD). The LBD is a longitudinal version of the Census Bureau’s Business Register that
is invaluable for examining producer dynamics, job flows, structural change and regional economic growth.
See Jarmin and Miranda (2002) for more details.
21
after an April 1997 U.S. Federal Register notice announced the decision to adopt NAICS,
and an August 1998 notice followed with late changes to the NAICS 1997 specification. At
the same time, the Census Bureau’s schedule for preparing, printing, and labeling
questionnaires for the December 1997 census mailout required us to determine the
instruments’ final content during the first half of 1997. Since NAICS refinements continued
after the questionnaires were final, there were some cases where the instruments’
classification content did not align precisely with final industry definitions, and it was
necessary to implement some NAICS industries on an “as collected” rather than an “as
defined” basis. Drawing from this experience, the lessons are: expect last-minute changes,
particularly when there is a major revision to the industrial classification system; insofar as
possible, allow time for the new system to stabilize before implementing it; and best efforts
notwithstanding, be prepared to adapt implementation plans to accommodate some remaining
degree of definitional uncertainty.
9.3
Second, the 1996 refiling collection for multiunits did not work as well as we needed
it to. It was designed to obtain classification updates while causing minimal change to the
reporting procedures with which companies were familiar and to existing collection and
processing systems. As a result, the Report of Organization collection instrument was
modified only slightly, and we addressed the refiling requirement by using a self-coding
procedure that referred the respondent to classification inserts (separate enclosures; an
example is shown in Attachment B). Unfortunately, companies did not respond well to this
design, and we initially received classification updates for only 47 percent of the multiunit
establishments that had been targeted for refiling. A substantial amount of costly follow-up
contact and other supplementary effort were needed to improve the multiunit reclassification
rate to an acceptable level. Drawing from this experience, the lessons are: it was ineffective
to refile multiunit establishments by adapting our regular register proving survey and/or by
using a self-coding procedure that relied on classification inserts; we needed a better design
than the one used for the 1996 Company Organization Survey.
22
References
“1997 Economic Census Classification Report” (instruments used for the single unit refiling
survey done in December 1996). U.S. Census Bureau. Undated (date of access
September 2004). <http://www.census.gov/epcd/www/pdf/97nc/nc9922.pdf>.
“1997 Economic Census Forms” web page. U.S. Census Bureau. Undated (date of access
September 2004). <http://www.census.gov/epcd/www/ec97form.html>.
Ambler, Carole A. “NAICS and U.S. Statistics.” Joint Statistical Meetings. Dallas, Texas.
August 1998. Available at < http://www.census.gov/epcd/www/asambler.htm>.
Bayard, Kimberly N., and Shawn D. Klimek. “Creating a Historical Bridge for
Manufacturing Between the Standard Industrial Classification System and the North
American Industry Classification System.” Proceedings of the Annual Meeting of the
American Statistical Association. San Francisco, California. August 2003.
“Bridge Between NAICS and SIC—1997.” U.S. Census Bureau. June 2000 (date of access
September 2004). <http://www.census.gov/epcd/ec97brdg/97x-cs3.pdf>
“Comparative Statistics—1997.” U.S. Census Bureau. June 2000 (date of access September
2004). <http://www.census.gov/epcd/ec97sic/97x-cs2.pdf>.
Internal Revenue Service Forms and Publications web pages. U.S. Department of the
Treasury, Internal Revenue Service. Undated (date of access September 2004).
 Instructions for IRS Form 1120, “U.S. Corporation Income Tax Return,” and IRS
Form 1120A, “U.S. Corporation Short-Form Income Tax Return” (both 2003), pp.
21-22: <http://www.irs.gov/pub/irs-pdf/i1120_a.pdf>.
 Instructions for IRS Form 1065, “U.S. Return of Partnership Income” (2003), pp.
32-34: <http://www.irs.gov/pub/irs-pdf/i1065.pdf>.
 Instructions for IRS Form 1040, “U.S. Individual Income Tax Return” (2003; sole
proprietorships file Schedule C, “Profit or Loss from Business”), pp. C-7 – C-9:
<http://www.irs.gov/pub/irs-pdf/i1040.pdf>.
 IRS Form SS-4, “Application for Employer Identification Number”:
<http://www.irs.gov/pub/irs-pdf/fss4.pdf>.
MacDonald, Brian. “Implementing a Standard Industrial Classification (SIC) System
Revision.” Business Survey Methods. Ed. Brenda G. Cox et al. New York. John Wiley
& Sons, Inc., 1995.
Mesenbourg, Thomas L. “NAICS Implementation Plan for the United States.” 10th
International Roundtable on Business Survey Frames. Quebec, Quebec. October 1996.
Mikkelson, Gordon, Teresa L. Morisi, and George Stamas. “Implementing the NAICS for
Business Surveys at BLS.” International Conference on Establishment Surveys II.
Buffalo, New York. June 2000. Available at
<http://www.bls.gov/ore/pdf/st000070.pdf>.
23
“North American Industry Classification System (NAICS)” web page. U.S. Census Bureau.
January 14, 2004 (date of access September 2004).
<http://www.census.gov/epcd/www/naics.html>
United States Office of Management and Budget. North American Industry Classification
System—United States, 1997. Lanham, Maryland: Bernan Press, 1998.
United States Office of Management and Budget. North American Industry Classification
System—United States, 2002. Lanham, Maryland: Bernan Press, 2002.
24
Attachment A
Page 1 of 2
1997 Economic Census Classification Report
Instrument Used for 1996 Refiling Survey of Single Units (17 Versions)
Attachment A
Page 2 of 2
1997 Economic Census Classification Report
Instrument Used for 1996 Refiling Survey of Single Units (17 Versions)
2
Attachment B
Page 1 of 2
1996 Report of Organization
Industry Classification Insert (11 Versions)
Attachment B
Page 2 of 2
1996 Report of Organization
Industry Classification Insert (11 Versions)
2
Attachment C
Page 1 of 1
Comparative Statistics on a 1987 SIC Basis—1997 and 1992
[Data are shown for selected SIC industries from earlier illustrations.]
Table 1. Comparative Statistics for the United States—1997
[Includes only establishments with payroll. Data are in current dollars and have not been adjusted for inflation.]
Receipts
Establishments
Paid employees
($1,000)
SIC
1987 SIC Description
1997
1992 % chg
1997
1992 % chg
1997
1992 % chg
1081 Metal mining services
Oil and gas exploration
1382
services
Nonmetallic minerals
1481
services, except fuels
Annual payroll
($1,000)
1997
1992 % chg
203
251
-19.1
341,888
350,441
-2.4
3,066
2,973
3.1
110,070
104,612
5.2
1,197
1,473
-18.7
818,607
964,629
-15.1
7,039
12,930
-45.6
215,996
423,687
-49.0
172
N
N
190,942
188,932
1.1
1,874
N
N
63,551
N
N
69,376 52,375
32.5 62,276,780 32,885,901
89.4
867,462 523,650
65.7 17,597,943
9,783,317
79.9
Engineering services
52,526 41,834
Architectural services
20,602 17,875
Surveying services
9,025 8,418
Testing Laboratories %
5,488 4,540
Business consulting
8748 services, not elsewhere
17,853 12,628
classified %
N – Comparable data not available
25.6 88,180,688 65,245,236
15.3 16,988,338 11,244,379
7.2 3,453,489 2,280,177
20.9 6,442,964 4,763,614
35.2
51.1
51.5
35.3
730,048 657,609
146,702 121,675
56,880 45,324
82,024 70,462
11.0 35,337,890 27,246,839
20.6 6,468,524 4,408,064
25.5 1,712,316 1,089,694
16.4 2,708,782 1,998,829
29.7
46.7
57.1
35.5
41.4
90.0
47.4
80.7
7389
8711
8712
8713
8734
Business services, not
elsewhere classified
8,687,728
4,573,223
77,341
52,456
3,191,884
1,766,156
Note: This is an HTML version of the Comparative Statistics tabulation similar to the one available on the Census Bureau’s website.
Printed and Adobe Portable Document Format (pdf) versions also are available.
Attachment D
Page 1 of 2
Bridge Between NAICS and SIC—1997
[Data are shown for selected industries from earlier illustrations.]
Table 1. NAICS-Based Industry Statistics for the United States with Distribution
Among 1987 SIC-Based Industries—1997
[Includes only establishments with payroll. The figures to the left of each SIC code gives the percentage of the SIC
industry’s receipts that are represented by the part shown and provide a hyperlink to Table 1 data for other parts of
the NAICS industry. The
symbol provides a hyperlink to Comparative Statistics data for the whole SIC industry.]
EstabAnnual
NAICS SIC
Pt Description
lishReceipts
Paid
payroll
ments
($1,000) employees
($1,000)
Architectural, engineering, & related
5413
92,710 116,986,061 1,038,317 46,942,816
services
54131
Architectural services
20,602
16,988,338
146,702
6,468,524
541310
Architectural services
20,602
16,988,338
146,702
6,468,524
8712
54133
541330
8711
54134
541340
Architectural services
Engineering services
20,602
52,526
16,988,338
88,180,688
146,702
730,048
6,468,524
35,337,890
Engineering services
Engineering services
Drafting services
52,526
52,526
1,872
88,180,688
88,180,688
605,362
730,048
730,048
9,150
35,337,890
35,337,890
310,342
1,872
1,872
2,771
605,362
605,362
639,041
9,150
9,150
8,674
310,342
310,342
240,080
2,771
2,771
639,041
639,041
8,674
8,674
240,080
240,080
587
1,087,786
9,905
445,595
587
1,087,786
9,905
445,595
21
3,783
41
1,101
213
518,667
2,907
104,681
17
8,313
62
2,877
336
557,023
6,895
336,936
8,864
3,041,882
51,814
1,431,603
8,864
3,041,882
51,814
1,431,603
175
8,689
5,488
145,416
2,896,466
6,442,964
1,829
49,985
82,024
56,223
1,375,380
2,708,782
Drafting services
1% of 7389 13 Drafting services
54135
Building inspection services
541350
Building inspection services
1% of 7389 12 Building inspection services
Geophysical surveying & mapping
54136
services
541360
1% of 1081 20
63% of 1382 20
4% of 1481 20
16% of 8713 20
54137
Geophysical surveying & mapping
services
Geophysical surveying services only for
metal mining, contract basis
Geophysical surveying services for oil &
gas fields, contract basis
Geophysical surveying services for
nonmetallic minerals (excluding fuels)
Geophysical surveying
Surveying & mapping (except
geophysical) services
Surveying & mapping (except
geophysical) services
0% of 7389 09 Map making services
84% of 8713 10 Surveying services
54138
Testing laboratories
541380
Testing laboratories
541370
5,488
6,442,964
82,024
2,708,782
100% of 8734 10 Testing laboratories
5,488
6,442,964
82,024
2,708,782
Pt – Part
The
symbol is used as a link to the 1992 figures shown in Comparative Statistics. Note that there are links only for
SIC industries, not for NAICS industries.
Attachment D
Page 2 of 2
Bridge Between NAICS and SIC—1997
[Data are shown for selected industries from earlier illustrations.]
Table 2. 1987 SIC-Based Industry Statistics for the United States with Distribution
Among NAICS-Based Industries—1997
[Includes only establishments with payroll. The figures to the left of each SIC code gives the percentage of the SIC
industry’s receipts that are represented by the part shown and provide a hyperlink to Table 1 data for other parts of
the NAICS industry. The
symbol provides a hyperlink to Comparative Statistics data for the whole SIC industry.]
EstabAnnual
Receipts
Paid
SIC
NAICS Pt Description
lishpayroll
($1,000) employees
ments
($1,000)
Engineering, architectural, and
871
82,153 108,622,515
933,630 43,518,730
surveying services
8711
Engineering services
52,526
88,180,688
730,048 35,337,890
541330
Engineering services
Architectural services
541310
Architectural services
8713
Surveying services
Geophysical surveying & mapping
51% of 541360 10
services (pt)
95% of 541370 10 Surveying services
Pt – Part
8712
52,526
20,602
20,602
9,025
88,180,688
16,988,338
16,988,338
3,453,489
730,048
146,702
146,702
56,880
35,337,890
6,468,524
6,468,524
1,712,316
336
557,023
6,895
336,936
8,689
2,896,466
49,985
1,375,380
Bridge symbols shown indicate the degree of comparability between SIC and NAICS categories.
(Bridge complete.)
Comparable
Table 1—NAICS derivable from SIC data.
Table 2—SIC derivable from NAICS data.
(Drawbridge slightly open.)
Almost comparable
Table 1—Sales or receipts from SIC are within 3% of sales or receipts from
NAICS.
Table 2—Sales or receipts from NAICS are within 3% of sales or receipts
from SIC.
Not comparable
Table 1—NAICS sales or receipts cannot be estimated within 3% from SIC
data.
Table 2—SIC sales or receipts cannot be estimated within 3% from NAICS
data.
(Drawbridge open.)
Note: These are HTML versions of Bridge Statistics tabulations similar to the ones available on
the Census Bureau’s website. Printed and Adobe Portable Document Format (pdf) versions also
are available.
2