SIC Classifies Organizations, NAICS Classifies Establishments

SIC and NAICS differ fundamentally in their unit of analysis, not just their code structure.

Under SIC, a company’s headquarters determined classification based on the overall largest product lines of the entire organization. NAICS changed this: it classifies each establishment (individual workplace) based on that specific location’s primary output.

This shift has implications beyond taxonomy. SIC aggregates diverse activities under a single corporate umbrella. NAICS reveals the actual distribution of economic activity across locations. A company might have one SIC code but multiple NAICS codes across its facilities.

The distinction matters for research: switching from SIC to NAICS reclassified large numbers of workers between sectors, particularly moving some from Manufacturing into Services. Time series spanning the 1997 transition require careful bridging.

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