American Institute of Certified Planners (AICP) Practice Exam

Which industrial classification system replaced the SIC?

1. Standard Industrial Classification (SIC)

2. North American Industry Classification System (NAICS)

3. Global Industry Classification Standard (GICS)

4. International Standard Classification of All Economic Activities (ISIC)

The correct answer is: North American Industry Classification System (NAICS)

The North American Industry Classification System (NAICS) replaced the Standard Industrial Classification (SIC) system to provide a more comprehensive and updated framework for classifying industries. Developed jointly by the United States, Canada, and Mexico, NAICS was introduced in 1997 to reflect the evolving economy, particularly in the service and technology sectors, which the SIC system was not adequately addressing. NAICS employs a hierarchical structure that allows for a greater level of detail and better aligns with the current state of the economy. It groups establishments based on the similarity of their production processes, facilitating more accurate economic analysis and reporting. The move to NAICS was significant for businesses, researchers, and policymakers, as it improved the way industry data could be collected and compared across different regions and sectors. In contrast, the other options mentioned serve different purposes or are frameworks in other contexts, such as the Global Industry Classification Standard, which is used primarily for financial analysis, or the International Standard Classification of All Economic Activities, which is broader and used internationally. These systems do not serve as direct replacements for the SIC within the North American context.