Economic Taxonomy Unraveled: NAICS, ISIC, NACE, and ANZSIC Compared and Contrasted

Introduction

The North American Industry Classification System (NAICS) and other comparable classification systems serve as frameworks for organizing and categorizing businesses and economic activities. These systems are key for statistical analysis, policy development, and business decision-making.

This article discusses NAICS and its comparable systems, including the United Nation's International Standard Industrial Classification (ISIC), the European Union's Nomenclature of Economic Activities (NACE), and the Australian and New Zealand Standard Industrial Classification (ANZSIC).

NAICS

NAICS, or the North American Industry Classification System, is a standardized classification system used in the United States, Canada, and Mexico to classify economic activities. It was developed by the statistical agencies of the three countries and is used to collect, analyze, and publish statistical data related to the economies of North America.

NAICS is hierarchical in nature and consists of five levels of classification, which are as follows:

1. Sector: The broadest level of classification, consisting of 20 sectors representing major economic activities, such as agriculture, mining, construction, and manufacturing.
2. Subsector: The second level of classification, consisting of 102 subsectors that further break down the sectors into more specific activities. For example, the manufacturing sector is divided into 21 subsectors, such as food manufacturing, textile mills, and machinery manufacturing.
3. Industry Group: The third level of classification, consisting of 325 industry groups that provide even more detailed descriptions of economic activities. For example, the industry group “Plastics Product Manufacturing” is part of the subsector “Plastics and Rubber Products Manufacturing”.
4. NAICS Industry: The most specific level of classification, consisting of over 1,000 industries that provide highly detailed descriptions of economic activities. For example, the NAICS industry “Motor Vehicle Body and Trailer Manufacturing” is part of the industry group “Motor Vehicle and Parts Manufacturing”.
5. National Industry: This level is specific to each country (the United States, Canada, and Mexico) and represents the unique industries within each country's economy.

NACE

NACE is the European Union's Nomenclature of Economic Activities, which is a standardized classification system used to classify economic activities in the European Union. It is also used by other countries around the world as a basis for their own national classification systems.

The NACE system is hierarchical in nature, with four levels of classification. The hierarchy is as follows:

1. Section: The broadest level of classification, consisting of 21 sections representing major economic activities, such as agriculture, mining, manufacturing, and transportation.
2. Division: The second level of classification, consisting of 88 divisions that further break down the sections into more specific activities. For example, the manufacturing section is divided into 24 divisions, such as food products, textiles, and machinery.
3. Group: The third level of classification, consisting of 272 groups that provide even more detailed descriptions of economic activities. For example, the group “Manufacture of other non-metallic mineral products” is part of the division “Manufacture of basic metals and fabricated metal products, except machinery and equipment”.
4. Class: The most specific level of classification, consisting of over 700 classes that provide highly detailed descriptions of economic activities. For example, the class “Manufacture of ceramic sanitary fixtures” is part of the group “Manufacture of other non-metallic mineral products”.

ANZSIC

ANZSIC, or the Australian and New Zealand Standard Industrial Classification, is a classification system used in Australia and New Zealand to classify economic activities. It was developed by the Australian Bureau of Statistics and Statistics New Zealand and is used for the collection, compilation, and dissemination of official statistics on the economies of both countries.

Like NACE and NAICS, ANZSIC is hierarchical in nature and consists of four levels of classification, which are as follows:

1. Division: The broadest level of classification, consisting of 19 divisions representing major economic activities, such as agriculture, forestry, fishing, mining, construction, manufacturing, and transportation.
2. Subdivision: The second level of classification, consisting of 86 subdivisions that further break down the divisions into more specific activities. For example, the manufacturing division is divided into 12 subdivisions, such as food product manufacturing, textile, leather, clothing, and footwear manufacturing, and machinery and equipment manufacturing.
3. Group: The third level of classification, consisting of 295 groups that provide even more detailed descriptions of economic activities. For example, the group “Bakery Product Manufacturing” is part of the subdivision “Food Product Manufacturing”.
4. Class: The most specific level of classification, consisting of over 1,000 classes that provide highly detailed descriptions of economic activities. For example, the class “Bread Manufacturing” is part of the group “Bakery Product Manufacturing”.

ISIC

ISIC, or the International Standard Industrial Classification of All Economic Activities, is a classification system used globally to classify economic activities. It was developed by the United Nations Statistics Division and is used by countries around the world to collect, compile, and disseminate statistical data related to economic activities.

ISIC is hierarchical in nature and consists of four levels of classification, which are as follows:

1. Section: The broadest level of classification, consisting of 21 sections representing major economic activities, such as agriculture, mining, manufacturing, and transportation.
2. Division: The second level of classification, consisting of 88 divisions that further break down the sections into more specific activities. For example, the manufacturing section is divided into 24 divisions, such as food products, textiles, and machinery.
3. Group: The third level of classification, consisting of 238 groups that provide even more detailed descriptions of economic activities. For example, the group “Manufacture of other non-metallic mineral products” is part of the division “Manufacture of basic metals and fabricated metal products”.
4. Class: The most specific level of classification, consisting of over 400 classes that provide highly detailed descriptions of economic activities. For example, the class “Manufacture of ceramic sanitary fixtures” is part of the group “Manufacture of other non-metallic mineral products”.

Similarities

Hierarchical Structure

All four systems utilize a hierarchical structure to organize industries, starting from broader categories at the top and becoming increasingly specific at lower levels.

Basis for Economic Data Collection

These systems serve as the foundation for collecting, analyzing, and publishing economic data in their respective regions or countries.

Regular Updates

Each system is periodically updated to reflect the changing economic landscape and to ensure the classifications remain relevant.

International Compatibility

The systems are designed to be compatible to some extent, allowing for international comparisons and data analysis. For example, NACE is closely aligned with ISIC, and ANZSIC is based on both ISIC and NAICS.

Differences

Geographical Scope

NAICS is specific to North America, ISIC is a global standard, NACE is for the European Union, and ANZSIC is exclusive to Australia and New Zealand.

Coding System

While NAICS, ISIC, and ANZSIC use numeric codes, NACE uses alphanumeric codes for classification.

Specificity and Adaptations

Each system has unique adaptations and specificities to cater to the needs of the regions or countries they represent. For instance, NACE includes certain classifications unique to the European Union, while ANZSIC incorporates economic activities specific to Australia and New Zealand.

Frequency of Updates

The frequency of updates for each system varies. NAICS is updated every five years, while ISIC, NACE, and ANZSIC revisions depend on the need for updates and changes in the respective economies.

Number of Levels and Codes

The number of hierarchical levels and codes within each classification system differs. NAICS has six-digit codes, ISIC has five-digit codes, and both NACE and ANZSIC have four levels with varying code lengths.

Other Classification Systems

Other countries also have their own version of industrial activity classifications. The United Nations maintains a list that identifies which classification systems are used by which countries.

Space Economy Size Estimates

Australia, New Zealand, Canada, United States, and other countries have published space economy size estimates for their country. Australia and New Zealand use the same classification system, which is different than a classification system used by Canada and United States. While similar, there are differences which means that caution should be taken when comparing estimates between different countries.

Summary

NAICS, ISIC, NACE, and ANZSIC are essential classification systems for understanding and analyzing the global economy. While these systems have several similarities, such as hierarchical structure and compatibility for international data analysis, they also have unique characteristics tailored to the regions and countries they serve.