BC Business
Without a government classification system for new industries such as artificial intelligence, we have no way to measure their economic impact.
The North American Industry Classification System (NAICS) lacks a category for artificial intelligence
It’s one of the most powerful tools in economic decision-making in Canada, but how many people know what it stands for?
NAICS is an acronym for “North American Industry Classification System,” and behind those innocent-sounding words is the way all governments in Canada engage with the economy and industry sector performance. This is the framework that results in measurements of which sectors are expanding and could accelerate that growth, which are struggling and which are in decline.
The only problem is NAICS reflects the economic reality of the 20th century, not the 21st. Here’s how the NAICS codes classify industrial sectors:
One question that springs to mind: Where is the tech sector?
Mostly in professional, scientific and technical services. But some of it is also in information and cultural industries. Some is in manufacturing. Some is in arts, entertainment and recreation. Some is in management of companies and enterprises. And that’s before we even engage with the idea that today, every company is a tech company.
If you don’t accurately capture how large an industry sector is, how do you make decisions on what training and resources it needs? How do you measure the full amount of tax revenue that a sector contributes to funding essential public services?
There are multiple data categorization issues in B.C.—another example is that we have no reliable mechanism to capture the value of our service exports, including software, much of which is sold as a service (SaaS) these days. That might not matter if services were a small part of our economy, but they represent 75 percent of B.C.’s gross domestic product and 80 percent of its jobs.
In the past, little data was published on provincial services exports. At the B.C. level, we measured goods exports, so that was what was reported and analyzed, and what dominated discussion of the province’s industrial sectors, despite the significance of services across the economy as a whole. More recently, the growing economic importance of services has received attention, with additional reporting coming from Statistics Canada. But there’s still little B.C. activity on that front—the 2021 budget cited a year’s delay in the reporting of provincial-level data on exports of services.
Returning the NAICS list, it reveals so much about the past, although it’s intended as a tool for measuring the present and mapping the future. Think about just one important trend that’s impacting every industry: artificial intelligence. AI-enabled and -enabling technologies are baselining the economic architecture of the future. But within the NAICS system, there’s no way to classify AI businesses and jobs, so we have no data to measure progress in this area.
This is also important when it comes to bringing in the best foreign talent to work for Canadian AI companies. Because there’s no “AI” industry or occupation code, it’s challenging to obtain immigration work visas for people with essential skills in machine learning, neural network design and so on. To give praise where it’s due, Quebec has managed to solve this issue.
Statistics Canada also deserves credit for previously tackling a similar problem. Although cleantech isn’t tracked by NAICS, in 2017, the federal government provided $14.5 million to launch a Clean Technology Data Strategy. This program aims to supply better data on the industry to strengthen the evidence base for decisions, improve our understanding of the emerging cleantech landscape, and ensure the creation of impactful policies and programs to support the production and adoption of clean technology.
The work done for cleantech shows that it is possible to develop and implement better structures that can allow us to effectively measure new industries. It just takes a data-first mindset and modest investment. Without that investment, it will continue to be impossible to properly plan and and deliver for today’s world, never mind tomorrow’s.
Jill Tipping is president and CEO of the BC Tech Association. Eleena Marley is the acting CEO of the Vancouver Economic Commission.