Transcript Classification Issues

18th International Roundtable on Business Survey Frames
Beijing, China
17 - 22 October 2004
Session 4 — Classification Issues
Implementing a Major Revision to the
Industry Classification System
Ron S. Jarmin and Edward D. Walker
United States Census Bureau
North American Industry
Classification System—1997
Background
 North American partners Canada, Mexico, and the U.S.
developed NAICS collaboratively
 NAICS provides 3-country comparability for industries
 The U.S. adopted NAICS in 1997
 NAICS is a major structural and conceptual departure
from its U.S. predecessor, the Standard Industrial
Classification (SIC)
 The Census Bureau’s Business Register implemented
NAICS in 1997
2
OLD
NEW
U.S. Standard Industrial Classification–1987
Divisions
Major
Code Groups Title
Agriculture, Forestry, and
A 01-09
Fishing
B 10-14 Mining
C 15-17 Construction
D
20-39
E
40-49
F
50-51
H
60-67
G
52-59
Manufacturing
Transportation,
Communications and
Public Utilities
Wholesale Trade
Finance, Insurance, and
Real Estate
Retail Trade
North American Industry Classification System–1997
No of U.S.
No of Sectors
Industries
IndusNew Total
tries Code Title
Agriculture, Forestry, Fishing and
58 11
20
64
Hunting
31 21
Mining
0
29
26 23
Construction
3
28
31459
Manufacturing
79
474
33
22
Utilities
6
10
67 48Transportation and Warehousing
28
57
49
69 42
Wholesale Trade
0
69
52
Finance and Insurance
23
42
53
53
Real Estate and Rental and Leasing
15
24
44Retail Trade
17
72
45
64
72
Accommodation and Food Services
10
15
51
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
54
I
70-89
Services
150
56
61
62
71
81
J 91-97
K 99
Total
[No SIC counterpart;
classified in the divisions
of establishments
managed.]
Public Administration
Unclassifiable
– 55
Management of Companies and
Enterprises
27 92
Public Administration
–
[No NAICS counterpart.]
1,004 Total
2
29
–
–
358 1,170
3
Characteristic
SIC versus NAICS
Classification based
on a consistent
economic concept
Codes
Structure
Industries
SIC 1987
NAICS 1997
No
Yes
Ad hoc mix of production- and
market-oriented industries
•
•
•
•
•
Alphabetic divisions, A–J
2-digit major groups
3-digit industry groups
4-digit industries
6-digit processing codes
Production processes
•
•
•
•
•
•
2-digit
3-digit
4-digit
5-digit
6-digit
8-digit
sectors
subsectors
industry groups
NAICS industries
National industries
processing codes
10 Divisions
20 Sectors
(Disaggregation and
reorganization for servicesproducing industries)
1,004 total
• 1,170 U.S. industries,
total
• Net gain of 166 industries
• 358 industries defined
separately for the first
time (70% in services)
• 300 industries revised
substantially
4
SIC versus NAICS
SIC/NAICS Relationships
 614 SIC industries each go to a single NAICS industry
 390 SIC industries consist of 2 subindustry parts or
more that go to different NAICS industries
(1,357 such subindustry parts, total)
 80 SIC industries consist of 2 subindustry parts or
more that go to NAICS industries in different sectors
 401 NAICS industries consist of 2 subindustry parts or
more that come from different SIC industries
 Overall, relationships may be 1:1, 1:many, many:1, or
many:many
5
NAICS Implementation
The Census Bureau’s Goals
 Complete transition for the 1997 reference period
 Make implementation as complete and accurate as
possible
 Keep additional cost to a minimum
 Keep additional response burden to a minimum
 Provide statistical presentations that ease the
transition for data users
6
NAICS Implementation
The Census Bureau’s Strategies
 Use 1997 Economic Census as the implementation
vehicle
• Our most comprehensive, broad-based economic collection
• Tightly integrated with the Business Register, which the
census updates
• Rich variety of specialized content for assigning industry codes
• Extensive, detailed industry statistics that are optimal for
introducing the new classification system
7
NAICS Implementation
The Census Bureau’s Strategies—Continued
 Classify establishments according to both
NAICS and SIC for the 1997 reference period
• Requirement for presenting 1997 data on both bases
• Additional subindustry detail
– NAICS components of SIC industries
– SIC components of NAICS industries
• Bridge SIC coding scheme
1,971 industry/subindustry
classes, total
– SIC-based root (4 digits)
– Suffix (2 digits) captures additional subindustry detail
– Meets requirement for continued support of SIC-based surveys
through 2001
– Fits existing data structures and processing systems
– Translates to a distinct NAICS industry and a distinct SIC industry
8
OLD
Standard Industrial Classification—1987
Code
Title
8712
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)
0781 (Part)
8748 (Part)
8711
7389 (Part)
7389 (Part)
8713 (Part)
1081 (Part)
1382 (Part)
1481 (Part)
7389 (Part)
8713 (Part)
8734 (Part)
NEW
Bridge
North
American
Industry
Classification System—
SIC
1997
Code
Code
Title
Architectural, Engineering, and
5413
Related Services
871200 541310 Architectural Services
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
9
Administrative Data
 Important source of data, including industry codes
• Business Register maintenance
• Economic census observations—i.e., for smaller single units
excluded from direct collection
 NAICS implementation by suppliers
•
•
•
•
Internal Revenue Service: 1998 (available early 1999)
Social Security Administration: 1999
Bureau of Labor Statistics: 1997 – 2000
Methods varied
 Role in Census Bureau’s NAICS implementation
• Minor for 1997—too late (nonemployers an exception)
• Important for Business Register maintenance—1998 and later
10
1996 Refiling Collections
 Targeted establishments in 80 SIC Industries that had parts
going to different NAICS Sectors
Example: Metal Mining Services
- Part to NAICS Sector 21—Mining
- Part to NAICS Sector 54—Professional, Scientific, and Technical Services
OLD
Standard Industrial Classification—1987
Code
Title
Metal Mining Services
Metal Mining Services (Except
1081 (Part)
Geophysical Surveying Services)
Metal Mining Services
1081 (Part)
(Geophysical Surveying Services)
Bridge
SIC
Code
NEW
North American Industry Classification
System—1997
Code
Title
1081
108110 213114 Support Activities for Metal Mining
108120 541360
Geophysical Surveying and Mapping
Services
 Important preparation for economic census collection
• 454 questionnaires tailored to fairly narrow industry groups
• Content varied markedly from sector to sector
11
1996 Refiling
Collections
Single Units
 Special survey
• 215,829 single units
• December 1996 mailing
• March 1997 follow-up
 Questionnaire
• 1 page
• 17 versions for groups of
related industries
• Listed bridge SIC industry/
subindustry descriptions
 Respondent asked to select
one description that best fit
the business’ primary activity
12
1996 Refiling Collections
Multiunits
 Done by means of the 1996 Company Organization Survey (COS)
 Sample modified to include companies with establishments in
80 industries targeted for refiling
• 50,698 enterprises with 1.1 million establishments, total
• 67,973 establishments targeted for refiling
 Presented inventory of establishments and requested updates to
industry code and other items for each one

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
13
1996 Refiling
Collections
Multiunits—Continued
 Inventory list directed
respondent to an industry
coding insert
• 11 versions for groups of
related industries
• Listed bridge SIC industry/
subindustry descriptions
 Respondent asked to select
one description that best fit the
business’ primary activity and
recorded the code on the
inventory list
14
1997 Economic Census Collections
Standard Forms
 Sent to
• All multiunits
• Larger single units
• A sample of smaller single units
3.4 million establishments
 454 versions tailored to groups of related industries
 Content
• Basic economic measures: sales/receipts/revenue, payroll,
employment, and other items that varied by sector
• Specialized items important for assigning bridge SIC codes—e.g.,
–
–
–
–
–
Detail of sales/receipts/revenue (by class)
Kind of business (bridge SIC industry/subindustry descriptions)
Materials consumed (by class)
Selling characteristics
Employees by occupation
15
1997 Economic Census Collections
Sector-Specific Classification Forms
 Sent to smaller, partially classified single units—1.2 million
 28 versions tailored to groups of related industries
 Content
• Kind of business
– Bridge SIC industry/subindustry descriptions with check boxes
– Respondent asked to pick the one description that best fit the business’
primary activity
• Some versions had other classification inquiries—e.g.,
– Method of selling
– Selling characteristics
Retail trade and wholesale trade
16
1997 Economic
Census Collections
General Classification Form
 Sent to unclassified single units of
any size—0.4 million
 Content
• Business or activity inquiry
– Bridge SIC industry/subindustry
descriptions with check boxes
– Respondent asked to pick the
one description that best fit the
business’ primary activity
• Sources of sales, receipts, or revenue
• Materials consumed (manufacturers)
• Class of customer
 Once classified, larger single units
were sent a standard form as
described earlier
17
1997 Economic Census
Classification Methods
 Industry coding edits
• Applied complex rules
• Considered a variety of classification data from standard forms
 Clerical coding
• Used industry coding procedures and reference material
• Primary uses:
– Classification form responses that required interpretation
– Referrals from industry coding edits
– Industry descriptions from nonemployers’ tax data
 Analytical coding
• Used industry expertise and reference material
• May have contacted respondent for clarification
• Primary uses:
– Difficult cases referred by clerical coding units
– Classification errors identified by macro-analytical review of data products
18
1997 Economic Census
Classification Methods—Continued
 NAICS classifications from 1998 tax data—nonemployers only
 Statistical modeling procedure
• Parameters
– Based on subpopulation of establishments with a complete 6-digit
bridge SIC
– Determined relative distribution of units from each 2-, 3-, 4-, or 6-digit
bridge SIC to the corresponding set of 6-digit bridge SICs
• Method
– Assumed similar bridge SIC distributions for partially and completely
classified establishments
– Preserved the distributions observed for completely classified
establishments
– Used 3 uniformly distributed digits from the establishment’s EIN as a
distribution index
– Assigned a 6-digit bridge SIC code to each establishment by referring its
SIC and distribution index to the distribution parameters
19
1997 Economic Census
Classification Methods—Continued
Statistical Modeling Procedure Illustrations
Parameters for Bridge SIC Modeling Procedure
SIC
Code
(In)
Example 1
Example 2
Cumulative
Distribution
Parameter
(> Index )
Bridge
SIC Code
(Out)
Distribution within
SIC Code (In)
Cumulative
Percent
Percent
17.8%
17.8%
7.0%
24.8%
0.1%
24.9%
2.9%
27.8%
72.2%
100.0%
Corresponding
NAICS Code
870000
870000
870000
870000
870000
178
248
249
278
1000
871100
871200
871310
871320
Etc.
54133
54131
54136
54137
Etc.
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
Illustrations of the Bridge SIC Modeling Procedure
Example
1
ID
0123456248
2
0123456789
EIN
(Index based on
positions 7 – 9)
123456248
SIC Code Bridge SIC
(In)
Code (Out)
870000
871310
123456789
871000
Procedure
1. Identify the first row that
matches on SIC code (in)
2. Compare the establishment’s
3-digit index (based on EIN)
to the cumulative distribution
parameter
• If INDEX < PARAMETER,
assign corresponding
bridge SIC code (out)
• Else, advance to next row
and repeat Step 2
871200
20
1997 Economic Census
Data Products
Comparative Statistics for the United States on a 1987 SIC
Basis—1997
[Includes only establishments with payroll. Data are in current dollars and have not been adjusted for
inflation.]
Receipts
Establishments
($1,000)
SIC
1987 SIC Description
Annual payroll
($1,000)
Paid employees
1997
1992
% chg
1997
1992
% chg
1997
1992
% chg
1997
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
8711 Engineering services
52,526 41,834
25.6 88,180,688 65,245,236
35.2
730,048 657,609
11.0 35,337,890 27,246,839
29.7
8712 Architectural services
20,602 17,875
15.3 16,988,338 11,244,379
51.1
146,702 121,675
20.6
6,468,524
4,408,064
46.7
1081 Metal mining services
1382
Oil and gas exploration
services
1481
Nonmetallic minerals
services, except fuels
7389
Business services, not
elsewhere classified
1992 % chg
8713 Surveying services
9,025
8,418
7.2
3,453,489
2,280,177
51.5
56,880
45,324
25.5
1,712,316
1,089,694
57.1
8734 Testing Laboratories
5,488
4,540
20.9
6,442,964
4,763,614
35.3
82,024
70,462
16.4
2,708,782
1,998,829
35.5
17,853 12,628
41.4
8,687,728
4,573,223
90.0
77,341
52,456
47.4
3,191,884
1,766,156
80.7
Business consulting
8748 services, not elsewhere
classified
N – Comparable data not available
Note: Data are shown for selected industries used in the paper’s illustrations.
21
1997 Economic Census
Data Products
NAICS-Based Industry Statistics for the United States with
Distribution Among 1987 SIC-Based Industries—1997
[Includes only establishments with payroll.]
NAICS
SIC
Pt Description
541330
8711
541360
Establishments
Receipts
Paid
($1,000) employees
Annual
payroll
($1,000)
Engineering services
52,526
88,180,688
730,048
35,337,890
Engineering services
52,526
88,180,688
730,048
35,337,890
587
1,087,786
9,905
445,595
Geophysical surveying & mapping
services
1% of 1081 20
Geophysical surveying services only for
metal mining, contract basis
21
3,783
41
1,101
63% of 1382 20
Geophysical surveying services for oil &
gas fields, contract basis
213
518,667
2,907
104,681
17
8,313
62
2,877
336
557,023
6,895
336,936
4% of 1481 20
Geophysical surveying services for
nonmetallic minerals (excluding fuels)
16% of 8713 20 Geophysical surveying
Pt – Part
Comparable
NAICS/SIC
NAICS
Industry
SIC 1987
Components
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.
Note: Data are shown for selected industries used in the paper’s illustrations.
22
1997 Economic Census
Data Products
1987 SIC-Based Industry Statistics for the United States with
Distribution Among NAICS-Based Industries—1997
[Includes only establishments with payroll.]
SIC
NAICS
Pt Description
8712
541310
8713
51% of 541360 10
Establishments
Receipts
Paid
($1,000) employees
Annual
payroll
($1,000)
Architectural services
20,602
16,988,338
146,702
6,468,524
Architectural services
20,602
16,988,338
146,702
6,468,524
9,025
3,453,489
56,880
1,712,316
336
557,023
6,895
336,936
8,689
2,896,466
49,985
1,375,380
Surveying services
Geophysical surveying & mapping
services (pt)
95% of 541370 10 Surveying services
Comparable
SIC/NAICS
SIC 1987
Industry
NAICS
Components
Pt – Part
Note: Data are shown for selected industries used in the paper’s illustrations.
23
Time Series Considerations
 The adoption of NAICS causes a disruption in
industry level time series data used by policymakers
and researchers
 Also affects the confidential micro data sets used at
Census and its Research Data Centers
24
Time series (cont.)
 Example of the problem
Table 5. Sample Bridge Between SIC 3578 and NAICS
NAICS
Description
SIC 3578 – Calculating &
Accounting Machines, Except
Electronic Computers
333313
Office Machinery Manufacturing
Other Computer Peripheral
334119
Equipment Manufacturing
Source: Bayard and Klimek (2003)
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%
25
Time series (cont.)
 Historical NAICS Classification Methodology
•
•
Bayard and Klimek (2003) develop a method to recursively
assign NAICS codes to historical Census of Manufactures
data
4 ways to assign codes
1.
2.
3.
4.
Product Code based assignment
One to One SIC – NAICS mappings
Longitudinal establishment linkages
Statistical Model
26
Time series (cont.)
 Uses, status and next steps
• Methodology has been used to develop NAICS based time
series data for Plant Capacity and Industrial Production
• Also used for Census Benchmarking exercise for Retail and
Wholesale surveys
• Current plans to recode Longitudinal Business Database (i.e.,
all establishments in the Bureau’s business register going back
to 1975)
27
Lessons Learned
Minor discrepancies between final NAICS specification
and census classifications
 Causes:
•
NAICS refinements continued into early 1998
–
–
•
Detailed industry definitions
Determining industry placement for 35,000 specific activities
December 1997 census mailout required questionnaire content had
to be made final during the first half of 1997
 Result: Some industries published on an “as collected” basis
 Lessons:
•
•
•
Expect last-minute changes
As much as possible, allow industry classification system to stabilize
before implementing it
Be prepared to adapt to definitional uncertainty
28
Lessons Learned
1996 multiunit refiling produced low item
response rate for reclassification inquiry
 Causes:
• Use of traditional collection instrument with minimal change
– Designed primarily for collecting company organization
information
– Not optimal for collecting classification updates
• Classification insert did not work well
 Result: costly follow-up and supplementary
classification activity
 Lesson: A better design was needed
Data users will demand time series continuity
29