Marcia Hultman

Cabinet Secretary

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South Dakota e-Labor Bulletin

January 2023

Industry or occupation: The importance of definitions in using workforce data

“Industry” and “occupation” are sometimes used interchangeably in labor market information. We “data nerds” in the Labor Market Information Center are the first to admit we have an over-abundance of technical jargon (and admittedly sometimes almost our own language). We realize sometimes we get too “down in the weeds,” where nitty gritty details of words used don’t always impact the actual numbers used. But this is one case where details and definitions do matter—and do affect the numbers.

For example, a recent newspaper article incorporating data sourced to us stated South Dakota’s Manufacturing industry employed 32,010 workers in 2021. But employment in the Manufacturing industry is considerably higher than that, 43,812 in 2021. The article also used a figure of $37,710 ($18.13 median hourly wage) as annual pay in the Manufacturing industry in the state. Annual pay in the Manufacturing industry was $56,072 in 2021. The data used was correct—but was specific to production occupations, not the Manufacturing industry as a whole.

As a refresher, we’ll share below definitions of “industry” and “occupation” as they are generally used in labor market information. But in simplistic, easier to remember terms, you can think of industry as categories of where people work. Occupations are a way to categorize what people do at work.

Industry — A way of categorizing private businesses and government agencies by the economic activities in which they are involved. The North American Industry Classification System (NAICS) is the standard industry classification system used in labor market information in the United States, Canada and Mexico. Learn more about NAICS and see examples of the taxonomy.

Occupation — A way of categorizing workers with similar job duties, and in some cases skills, education, and/or training. Although several occupational taxonomies are used for different purposes, the one most commonly used in labor market information is the Standard Occupational Classification (SOC) System, or the closely related O*Net classification system. (O*Net and SOC are closely correlated; the main difference is O*Net includes even greater detail in organizing occupations.) Learn more about SOC and see examples of occupational categories and specific occupations. Or check out O*Net Online for even more specialized classification of occupations.

Because businesses and government agencies normally require a full range of skill sets and tasks to operate effectively, they employ workers in a wide range of occupations. Although there is a close correlation between production occupations (ranging from a wide variety of machine setters/operators and machinists to hand assemblers and cutters/trimmers) and the Manufacturing industry, the definitions do make a difference. In addition to the wide range of production occupations, the Manufacturing industry also employs many people in other types of occupations—from clerical and administrative to management and marketing, for example. For more information on the range of occupations found in industries, you may be interested in our May 2019 Labor Bulletin article.
Which is more correct to use, industry data or occupational data?

It depends on how you plan to use the data. For example, if you want to use employment levels as an economic indicator of how construction has fared in recent years in the state, we’d recommend using data on the Construction industry. Although data is available for a Construction and Extraction Occupations category, the data would again exclude other types of occupations which are also commonly found in the Construction industry—such as surveyors, civil engineers and administrative staff. It would be important is this case to use data including all types of workers in the industry—not just those directly involved in building.

But let’s say you want to compare the wages from one geographic area to another of construction workers with specific skills sets (say carpenters and electricians). Then you would want to use the occupational wage estimates for those specific occupations, because annual pay data available on the Construction industry would reflect all types of workers employed in the industry—including not only construction occupations like carpenters and electricians, but also occupational fields like administration, management, mechanical repair and building maintenance.

Those using labor market information for decision-making about postsecondary educational programs to offer or those making career decisions generally want to use occupational information. In most cases, individuals will want to consider the employment and demand trends in the occupations of interest—regardless of the industries where the occupation is found.

Confused?

We get it. This is one reason LMIC staff with extensive experience collecting, analyzing and using statistics on industries and occupations are here to help. If you are looking for employment, demand or wage data to help inform decisions or frame business plans, let us know. We’re here to guide you to the appropriate data set to best meet your needs. Contact us any time we can help.