DIME/ITDG Plenary February 2015/12/EN
Joint DIME/ITDG PLENARY
24 February 2015
Item 12 of the agenda
Report from the Classifications Working Group
Report from the Classifications Working Group
1. Recommendation for action by the Joint meeting
The Joint meeting of DIME and ITDG is invited to take note of the progress made in the area of statistical classifications.
2. Background and brief history
The work developed during 2014 in the area of the Statistical classifications covered mainly the following subjects:
2.1 Classification of Products by Activities
The Commission Regulation 1209/2014 of 29 October 2014 establishes a new statistical classification of products by activity (CPA) closing the work carried out during 2013 and 2014 of update of this classification. CPA Ver. 2.1 is expected to be implemented in all relevant statistical domains from 2015.
A Task force composed by representatives of Hungary, Bulgaria, Poland, the Netherlands, France and Austria have further worked on the finalisation of the explanatory notes of the new classification and on verified the following correspondence tables:
CPA 2008 – CPA Ver. 2.1
CPA Ver. 2.1 – CN 2015
CPA Ver. 2.1 – CPC Ver. 2.1
The update of CPA has also as impact that some domain specific regulations need to be amended and this work will be carried out during 2015.
2.2 Classification of Holding Companies and Head Offices according to NACE
The issue of the classification of Holding companies (HC) and Head offices (HO) has been addressed on several forums.
From the side of the National Accounts, a Task Force was established under the umbrella of the Inter Secretariat Working Group on National Accounts (ISWGNA). The primary goal of the Task Force was to agree on more comprehensive guidance on, and consequently to arrive at an improved internationally comparable recording of HCs and HOs. This Task force has produced a report on these issues.
The Classifications Working Group decided that the issue of the classification of HC and HO according to the NACE classification was crucial and that there should be a consistent treatment in business registers and macro-economic statistics such as national accounts and balance of payments.
10 countries have volunteered to participate in a Task Force dealing with the classification of these entities according to NACE (Austria, Croatia, Finland, Netherlands, Switzerland, Germany, Denmark, France, Italy and United Kingdom).
During 2014 this Task Force worked on the development of methodology based on indicators and thresholds helping the classification. The final report will be finalised during February 2015.
2.3 Revision of COICOP classification
The current version of the Classification of Individual Consumption According to Purpose (COICOP) has been elaborated in second half of the 1990s and since then the consumer markets have changed, which has made some categories inadequate or the boundaries between categories less clear.
A possible revision of this classification was discussed in the last meeting of the United Nations Expert Group on International Statistical Classifications which took place in New York, 13-15 May 2013. The general view among countries is that there is a need to review and revise COICOP to ensure that it provides an adequate tool for the recording of households’ consumption expenditures and the other uses of COICOP. In particular, it is felt that an update is needed to reflect the drastic changes in goods and services in some areas, mainly in Divisions 08 and 09 where a range of new products have emerged and are growing in importance. At the same time, new products have also emerged in other areas of household consumption, old products have disappeared from the market and consumption patterns have changed, which also necessitate an update. In general, more guidelines are called for to ensure proper and correct recording.
Nevertheless, the System of National Accounts has just been revised and COICOP is part of it. The introduction of a new COICOP classification can delay the implementation of the new SNA. Furthermore, COICOP is also applied outside of national accounts in data bases that might have a different revision cycle. Most of these other applications (consumer price indices, household budget surveys) are important inputs for national accounts and using different versions of COICOP might hamper the use of these data.
Furthermore COICOP is one of the four “purpose classifications” which are interrelated; revising COICOP can imply also a review of COFOG, COPNI and COPP or at least the implications on these three purpose classifications should be analysed.
For these reasons the Expert Group on international classifications acknowledged the need for clarification of a certain number of issues related with this classification, but decided to postpone the revision in order to avoid conflicting with the current SNA implementation.
The Expert Group agreed to form a Technical Subgroup (TSG) that would look at case law issues for COICOP as a first step, which may then be expanded into broader considerations for a revision of COICOP and other classifications of expenditures according to purpose. This subgroup consists of Expert Group members from New Zeeland, Switzerland, Austria, Philippines, UNECE, UNSD, FAO, ILO and Eurostat (chair of the group).
The 2013 Eurostat Classifications Working Group considered useful that the work of this UN Expert sub-group, which will be necessarily covering world requirements, is completed by an EU Task force looking more deeply into the ESS needs. The conclusions of the EU task force were presented by Eurostat in the UN expert technical sub-group and constitute a strong input for the discussions.
The EU task force is composed by Germany, Finland, Italy, the Netherlands, Poland and United Kingdom and started working beginning of March 2014.
The UN Technical expert Group (TEG) and the EU Task Force (TF) started by analysing the results of the survey “Questionnaire on issues for a potential revision of the Classification of Individual Consumption According to Purpose (COICOP)” identifying areas of concern. Three main groups of issues were identified:
- Group 1. Issues which would imply a change in the COICOP structure/level of detail or change in titles,
- Group 2. Issues which could be solved by case laws although a change in structure could be a better solution and
- Group 3. Issues which could be solved by case laws (a class is clarified or expanded with products not elsewhere mentioned yet).
The TEG and the TF has then developed case laws for issues identified in groups 2 and 3 and after analysis of issues identified in the group 1 it was agreed that there is enough material to start a revision process of this classification.
A final report of the TEG and TF will be presented in the next United Nations Expert Group on International Statistical Classifications which will take place in New York, 19-22 May 2015. In this report it is recommended that a revision of the classification should be started now.
If the Expert Group agrees to start a revision process of COICOP, the timing of the process - in particular the expected completion date - should be coordinated with major users of the classification, such as National Accounts, Price statistics etc.
2.4 European Socio-economic Groups (ESeG)
The ESeG classification was firstly developed by an ESSnet composed by the National Statistical Institutes (NSIs) of France, Czech Republic, Italy and Hungary.
The ESeG classification is a tool to measure the social status, which indicates the status of an individual (or of a household) in the stratification system of societies.
This classification aims to facilitate the comparative analysis of many aspects of the quality of life and of social cohesion, for example health, living conditions and economic situation of European Union’s population, seeking to understand variation between member states. It should also provide a comparative research tool to facilitate analyses of intergenerational social mobility and the intergenerational inheritance of inequalities.
The classification is fully derived from “Core social variables”, as agreed on the Directors of Social Statistics in September 2009, to ensure that it can be used on all social surveys with the existent variables.
The work of this ESSnet was presented during the last months to the Labour Market, Social conditions and Classifications Working Groups and was finally endorsed by the Directors of Social Statistics Working Group in September 2014.
Eurostat is studying now the possibility to use the new classification European Socio-economic Groups (ESeG) for the dissemination of some relevant social statistics. Project managers of LFS and EU-SILC domains will identify a limited number of relevant thematic tables to be disseminated as an output test in the Eurostat database.
A Task Force with a short term mandate composed by Member States willing to study the methodological aspects and some pending issues for the implementation of the classification will be launched. The Task Force will be coordinated by Eurostat (Dir F) and will work mainly virtually.
2.5 Factory-less goods producers
Factory-less goods producers (FGP) are firms that supply inputs of intellectual property products (IPPs) (i.e., the technology, know-how, and product design) but outsource the processing activities required to produce the output. The FGP is a principal that controls the outcome of production of a good by undertaking the entrepreneurial steps and providing the technical specifications required to produce the good.
The FGP does not supply material inputs into the production process, they only supply service inputs in the form of technology, know-how, and product design. In addition, the FGP maintains control over the supply of material inputs by identifying key material inputs and monitoring the quality of material inputs through selection or preapproval of certain material input providers.
According to the present ISIC and NACE rules of classification FGP, as they do not have the ownership of the physical input materials cannot be classified in manufacturing.
The Conference of European Statisticians (CES) Bureau has created a Task Force on Global production with the aim of supporting the implementation of the System of National Accounts 2008 (SNA) and the Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6) with respect to global production arrangements.
The Task Force has identified a number of conceptual issues related to global production arrangements, where additional guidance and clarification of the SNA and related international standards may be required. The most important among them is the industrial classification and the statistical treatment of ‘Factory-less Goods Producers’.
The opinion of the Task Force is that ownership of material inputs should not be the sole determining factor in classifying an FGP. An FGP that controls the outcome of the production process and provides (owns) either the IPP inputs or other inputs (goods and services) to a contract processor should be classified to manufacturing as a separate and new subset of existing classifications that highlights the factory-less characteristic of the firm.
The United Nations ISIC technical expert group has met in October 2014 to discuss if the ISIC rules of classification should be amended. The main conclusions of this meeting were that no changes will be introduced on ISIC before we know more about these enterprises and their importance in the economy. This issue will be included in the agenda of the next UN Classifications expert group meeting.
Meantime, more research on the country base is needed. The research should not be restricted to the issue of the FGPs but it should cover outsourcing in general. The differences of labour costs according to the countries make outsourcing a more and more common practice and it is essential to have information on this phenomenon. It would be interesting to flag the FGPs and the contractors in a FGP relation in the business register to be able to evaluate their importance. Business registers, National accounts and classifications should discuss together these issues
From the EU side it would be important to discuss these issues in the Classifications Working Group and possibly launch a Task force who could work on the methodological aspects. A typology for the different relations between contractors and principals should be developed and a methodology on how to collect in the best way this information should be elaborated.
3. Policy context
An efficient implementation of the ESS statistical classifications requires a coordinated approach across countries and statistical domains in order to provide users with comparable and relevant data at EU and national level.
4. Consequences for the NSIs
The Member States are expected to implement CPA Ver. 2.1 in all relevant statistical domains and deliver data according to this classification.
Member States are also expected to apply the methodological recommendations expressed in the reports from the Tasks Forces dealing with the “classification of Holding Companies and Head Offices according to NACE” and the “Revision of the COICOP classification”.
5. Outstanding problems
No outstanding problems were identified
6. Risk assessment
If the methodological work accomplished in the different areas related to classifications is not taken into account the comparability of the data is not ensured and consequently the quality of the ESS statistics concerned would be affected
7. Next steps
During 2015 the work on Statistical classifications will focus on the following aspects:
- Amendments of domain specific legislation due to the CPA update
- Revision of the correspondence tables
- CPA Ver 2.1-Trade Described by Products Traded
- CPA Ver 2.1-Installation, Maintenance, Repair and Rental Described by CPA Categories
- Pursuing the methodological work on the ESeG classification and publication of first results according to this classification
- Follow up of the work carried out by the ISIC technical expert group on the classification of the Factory-less goods producers
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