The Journal Gazette
Friday, April 03, 2020 1:00 am

By the numbers: Continentwide classification system could aid in determining which businesses are 'essential'

Rachel Blakeman

As Hoosiers hunker down at Gov. Eric Holcomb's direction, it is obvious that some industries need to stay open.

Grocery stores? Absolutely. Hospitals? But of course. Fire stations and police operations? No doubt. But as Sherry Slater's March 31 article points out, the governor's well-meaning executive order for “essential businesses” does not make it crystal clear which companies should and should not be physically open.

It doesn't have to be this way. A system already exists that provides a ready-made list that represents the full spectrum of goods and services produced and consumed within the American economy: the North American Industrial Classification System or NAICS for short – pronounced “nakes.”

In use since 1997 and updated every five years by the Office of Management and Budget, it replaced the old Standard Industrial Classification system. The same NAICS codes are used in America, Canada and Mexico with the most recent version issued in 2017.

NAICS codes use a nested, hierarchical system ranging from two- to six-digit codes. Two-digit codes are the broadest categories such as construction or wholesale trade. Six-digit codes are very specific such as racetracks or custom computer programming services. Each additional digit within the system provides a greater degree of industry specificity.

For example, insurance carriers and related activities is a three-digit NAICS code within the two-digit finance and insurance category, while agencies, brokerages and other insurance-related activities is the next level of specialty at a four-digit code within insurance carriers. An employer's NAICS code typically represents its primary business, recognizing that companies may offer multiple services, such as a law firm that also provides collections services or a manufacturer that may also have a retail storefront.

While there is no public list of employers' NAICS codes, these codes are used administratively in tracking economic and employment data. For example, the Indiana Department of Workforce Development's quarterly unemployment insurance claims report lists the two-digit NAICS codes related to claimants' jobs.

All of this is to say that NAICS creates a uniform structure on which to build Indiana's list of essential industries, leaving little room for interpretation and dispute.

Pennsylvania Gov. Tom Wolf did just that with its “life-sustaining” industry list.

Pennsylvania uses what look to be three- and four-digit industry codes – the code numbers aren't listed on the released list – to identify what must close and what can remain physically open. Furthermore, it provides guidance on narrow exceptions such as emergency repairs by construction crews that would otherwise be shuttered or the prohibition on elective procedures at hospitals.

Such a list would be subject to political pressure from particular industries. Pennsylvania's coal mines can be open for business, but foundries are closed. An Indiana version may list different industrial priorities, but at least there's a single definitive source.

Using the Pennsylvania list for the companies featured in Slater's article, it's likely CK Products and Edy's could remain open as sugar and confectionary manufacturing and dairy product manufacturing, respectively, but Arden Industries' cushion production would probably be closed since furniture is not deemed to be life-sustaining in the Keystone State.

Adopting such a list for Indiana may not be accomplished in a timely manner for this crisis, and hopefully this document won't be needed for another generation or three. Yet in an age of preparedness for natural disasters, terrorism or, now, infectious disease threats, a NAICS list to identify Indiana's essential businesses would create a degree of uniformity that does not currently exist.

Rachel Blakeman is director of the Community Research Institute at Purdue University Fort Wayne.

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