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The Effects of Industry Classification Changes on US Employment Composition

Author

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  • Teresa C. Fort
  • Shawn D. Klimek

Abstract

This paper documents the extent to which compositional changes in US employment from 1976 to 2009 are due to changes in the industry classification scheme used to categorize economic activity. In 1997, US statistical agencies began implementation of a change from the Standard Industrial Classification System (SIC) to the North American Industrial Classification System (NAICS). NAICS was designed to provide a consistent classification scheme that consolidated declining or obsolete industries and added categories for new industries. Under NAICS, many activities previously classified as Manufacturing, Wholesale Trade, or Retail Trade were re-classified into the Services sector. This re-classification resulted in a significant shift of measured activities across sectors without any change in underlying economic activity. Using a newly developed establishment-level database of employment activity that is consistently classified on a NAICS basis, this paper shows that the change from SIC to NAICS increased the share of Services employment by approximately 36 percent. 7.6 percent of US manufacturing employment, equal to approximately 1.4 million jobs, was reclassified to services. Retail trade and wholesale trade also experienced a significant reclassification of activities in the transition.

Suggested Citation

  • Teresa C. Fort & Shawn D. Klimek, 2018. "The Effects of Industry Classification Changes on US Employment Composition," Working Papers 18-28, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:18-28
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    File URL: https://www2.census.gov/ces/wp/2018/CES-WP-18-28.pdf
    File Function: First version, 2018
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    Cited by:

    1. Nathan Goldschlag & Javier Miranda, 2020. "Business dynamics statistics of High Tech industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(1), pages 3-30, January.
    2. Nicholas Bloom & Andre Kurmann & Kyle Handley & Philip Luck, 2019. "The Impact of Chinese Trade on U.S. Employment: The Good, The Bad, and The Apocryphal," 2019 Meeting Papers 1433, Society for Economic Dynamics.
    3. David Berger & Kyle Herkenhoff & Simon Mongey, 2018. "Labor Market Power," 2018 Meeting Papers 170, Society for Economic Dynamics.
    4. Parag Mahajan, 2021. "Immigration and Local Business Dynamics: Evidence from U.S. Firms," Working Papers 21-18, Center for Economic Studies, U.S. Census Bureau.
    5. Melissa C. Chow & Teresa C. Fort & Christopher Goetz & Nathan Goldschlag & James Lawrence & Elisabeth Ruth Perlman & Martha Stinson & T. Kirk White, 2021. "Redesigning the Longitudinal Business Database," NBER Working Papers 28839, National Bureau of Economic Research, Inc.
    6. Kevin Rinz, 2018. "Labor Market Concentration, Earnings Inequality, and Earnings Mobility," CARRA Working Papers 2018-10, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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