From AEAStat staff:
The Office of Management and Budget OMB, through its Economic Classification Policy Committee (ECPC), is seeking comment by April 27, 2020 on potential changes to the structure and content of the North American Industry Classification System (NAICS). To ensure the accuracy, timeliness, and relevance of the classification, NAICS is reviewed every five years to determine what, if any, changes are required. The 2022 review will be the fifth since OMB adopted NAICS in 1997.
AEA members are invited to provide comments on three topics:
1) New and Emerging Industries
The ECPC is soliciting public comments on the advisability of revising NAICS for new and emerging industries in 2022 and soliciting proposals for these new industries. Proposals for new industries will be evaluated using a variety of criteria. Each proposal will be evaluated based on the application of the production function concept, its impact on comparability within North America and with other regions, and its impact on time series.
From a practical standpoint, industries must be of appropriate size. At the national level, this is generally not a major concern but there are a variety of statistical programs that produce industry data at the regional, State, metropolitan area, or even county or local level. Proposed industries must include a sufficient number of establishments so that Federal agencies can publish industry data without disclosing information about the operations of individual firms.
Proposals must be in writing and include the following information:
(a) Specific economic activities to be covered by the proposed industry, the proposed industry's production processes, its specialized labor skills, and any unique materials used. This detail should demonstrate that the proposed industry will group establishments with similar production processes that are unique and clearly separable from the production processes of other industries.
(b) Relationship of the proposed industry to existing NAICS United States 2017 six-digit national industries.
(c) Documentation of the size and importance of the proposed industry in the U.S.
(d) Information about the proposed industry in Canada and Mexico if available.
As the internet became an integral part of conducting business, two industries in NAICS were created (454111, Electronic Shopping, and 519130, Internet Publishing and Broadcasting and Web Search Portals) that delineate based on mode of delivery. As utilization of the internet evolved, the structure and coding of these industries in NAICS has also evolved. This leads the ECPC to request comments on the continued usefulness of the mode of delivery (online versus in store/print) as an industry delineation criterion, as discussed further below:
2) E-Commerce and Electronic Shopping in Retail Trade
The ECPC is soliciting comments on the current treatment of electronic shopping in NAICS and proposals for industry structure change in the Retail Trade sector. Retailers perform an intermediary function to get a product from the producer to the consumer. It is no longer clear whether the store vs. nonstore distinction should be determinative for classification purposes. The increasing prevalence of omni-channel distribution and variations in reporting patterns result in significant ambiguity in the interpretation and use of the industry data. Recent developments include pop up stores, delivery lockers, online ordering with in-store pick up, store inventory fulfillment of online orders, online orders in stores when an item is out of stock, and similar practices. Each of these cases presents ambiguity for classification of in store and nonstore data.
There are several possible changes to the retail trade structure to account for the blurring of modes of sale:
The first is to redefine NAICS 45411 to include establishments primarily rather than exclusively engaged in online retail sales, with no further changes. This has the benefit of low disruption to the retail structure but will not necessarily clarify the content of the resulting data.
Another option is to simply eliminate NAICS Industry 45411, and broadly use the NAICS industry structure for store retailers, maintaining separate industries for vending machine operators, fuel dealers, and other direct selling establishments. This approach would require a product or mode of sale inquiry below the industry level to identify and track online retail activity. Some programs that use NAICS could accommodate subindustry inquiries but major employment and productivity programs generally produce data at the industry level only.
3) Internet Publishing and Broadcasting
NAICS 51931, internet Publishing and Broadcasting and Web Search Portals, includes a wide range of activities presenting content over the internet. This NAICS industry includes online publications, online video services, social media sites, and even data brokers. The classification is easy to implement but there is growing concern that distribution of content via the internet is no longer a useful industry classification delineation.
The ECPC is soliciting comments on the usefulness of NAICS and proposals for changes to the concept that underlies the existing information industries. The ECPC is requesting comments on whether the internet is still a relevant industry distinction or if internet distribution should be treated as a mode of delivery with a goal of consistent treatment in Sector 44-45, Retail Trade, and Sector 51, Information. As is the case for retail trade, any changes to the industry structure in Sector 51, Information, are expected to create possibly significant time series breaks.