NAICS, which is an international standard, was developed by three statistical institutions in Mexico, Canada, the United States and Canada for collecting and publishing data on economic statistics. NAICS was created by the Office of Management and Budget in Canada, the National Institute of Statistics and Geography of Mexico and the ECPC of Canada. In 1997 the original system was released. It was then revised in 2002. Each five years there are modifications made to the industry’s integration. In 2002 for example, certain modifications were added to both the wholesale and informal trade sectors. The number of businesses declined between 2012 and 2017. From 1057 to 5 in 2017, there was a decrease of five industries.
This method is intended to increase the comparability and accuracy of North American business data. North American Industry Categorization System, or NAICS (the United States) was created to replace the existing Industrial classification. It makes it easier for North American industrial performance to be compared. The NAICS system gets updated every five years to ensure its relevance and compliance with changes in the environment. It maintains compliance through the classification of businesses according to industry. To ensure related entities are group together, each institution is assigned a subclassification. Code 11 in the hunting, forestry, agricultural and fishing industries is an example of a subclassification. There are 31-33 manufacturing sector codes. (Office of Management and Budget 2017, 2017).
NAICS categorization employs the coding system, which allows for industry comparison and is flexible. To outline different economic sectors, the method uses a 6-digit coding scheme. This system incorporates twenty industries. The system includes twenty-five different industries. Every business gets a primary code reflecting its line of business. Based on which sectors contributed the greatest income to an economy over the previous year, the codes are assigned. NAICS categorizes establishments according the use and types of their goods, production inputs, and processes (Lamb, et al. 2020).
NAICS was adopted by the NAFTA members to establish a standard method for collecting high-quality industry information. NAICS helps diverse economies measure economic success by measuring labor costs, annual inputs and geographic expansions in certain sectors. Other aspects incorporated into the system include the input-output connection in the building sector, the employment-output relationship, and productions that are capital-intensive (Kotler & Keller, 2020). NAICS has a prospective feature that improves global comparability between NAFTA partners. It identifies structural and technical changes in the economy, and then assesses their effect on future generations.
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