The Industrial Classification to Organize Industries Essay

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The term Industrial Classification refers to the system by which companies and industries are organized or classified by in the United States. It uses a label system called the Standard Industrial Classification (SIC) that is composed of four digits. This system started in 1937 with a four digit code in which has been modified to a six digit code and renamed to the North America Industry Classification System (NAICS). This system is used by governmental agencies to classify the different industrial areas, for example: Agriculture, Forestry, Fishing, Mining, Transportation, Construction, etc. The classification of industries was created by the United States government to be able to analyze measure and share this data with other…show more content…
Every three years the Bureau of Labor Statistics updates the codes and uses the SIC to report on pricing, and work force wages. According to Dill the Social Security agency assigns SIC codes to identify in what category the employees fall into based on their Employer’s ID on the applications (The Development and Use of Industry Data by the Social Security Administration, 1992). Here industries are measured as to what product is produced, how many employees it has, how their employees are being paid for and so forth. This data is then used to analyze how it affects the local and national economy. It is also used to understand the economy trends and its changes. This is important as the data allows agencies to share this data with the public and businesses can use it to develop strategic planning for its organizational purpose. A perfect example is how this system’s data is analyzed is when it began to be used the economy was based off the Industrial industry in the 1900’s and how it has changed throughout the years into what we have today, a service industry. Similar to all businesses and industries the Office of Management and Budget (OMB) had to revise the SIC system due to changes in the economy and industry. In 1992 the OMB created a branch called The Economic Classification Policy Committee to handle these changes in the industries. (Office of Management and Budget) After some modification in 1997
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