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protest, the impartial rent panel as described on page 7 held hearings on the Canal Zone on November 17, 18, 19, and 20, 1952.

I would like to point out to the committee that while this is spoken of as a rent panel and primarily considered rents, the basic principles which effect rents also have a like effect on all employee service activities.

The last paragraph on page 7 of my statement is the expression of the rent panel in regard to the Panama Canal Company's position regarding the operation of its business. I would like to quote one sentence which appears on top of page 8:

His reference to the statute rather seems to have been intended to suggest that the Panama Canal Company should be free, like a private corporation furnishing housing to its employees to determine its own rental policy having in view, however, that it must strive to recover costs including interest from its total operation of which housing is only a small part. However, the Bureau of the Budget in their letter of September 19, 1951 (see p. 7 of exhibits supplied in exhibit A) cited this committee's recommendations in House Report 544, 82d Congress. Subsequent communications between the Panama Canal Company and the Bureau of the Budget refers to this report and House Report 1652, 82d Congress.

Under paragraph 3, page 8, of my statement appears “Cost elements” which is taken from the panel recommendations. I would like to again call to your attention that the division administration," “general administration,” “employment costs,” and “administrative and general expenses” apply to all employee service activities and not to rent alone.

Paragraph 5 of page 9 quotes the panel recommendation as “the terms of reference under which the panel hearings were conducted seems to us to preclude conditions of these lines of argument” referring to the paragraph above. This paragraph is the panel's statement of our position that the Panama Canal Company as a whole need only meet the requirements of Public Law 841, 81st Congress.

In the panel's discussions and recommendations starting on page 9 of my statement they go into the special charges which tend to load the costs of Panama Canal Company operation. On page 10, paragraph 1, they emphasize that these charges find their way into expenses to the employee under the present Company's policy.

In paragraph 2, page 10 of my statement i quote the panel recommendation which states :

A serious question is raised whether or to what extent the special charges should be allowed to find their way into the rents for the effect of allowing this, as was said at the hearings, is "to take back with one hand what is given with the other" to the United States-rate employees. There has been a certain whitting away over the years of the special treatment traditionally accorded to United States-rate employees doing vital work in the zone; and it would appear that further invasions should not be made by indirection and without deliberate consideration of their effect. The point need not be labored further; it is appreciated by the Company comptroller who said that he had given it considerable study and contemplated making recommendations on it to the Board of Directors. The panel recommends that the exclusion of all or part of the special charges be considered in connection with the fixing of the proposed new rents.

No relief has been noticed by the employee of the Panama Canal Co.'s comptroller's study. In fact the employee has been given notice that effective July 5, 1953, rents will again be increased to include the item of interest charges.

The last paragraph on page 10, quoting from the panel recommendations state, the company's comptroller indicated that approval of the Director of the Budget and the chairman of the House Appropriations Committee should be obtained before any change could be made. I have not been informed the company has asked this approval. Therefore, we are here today to present the facts and request the approval.

The recommendations I make starting on page 11 in our opinion is fair and inexpensive to operate. The extent which the special charges find their way into other than “Employees service activities" would be complicated and expensive to determine. However, there is no question that the employee uses services grouped under "Other Service Activities” such as; Ground Care, Industrial Bureau, Motor Transportation, Power System, Printing Plant, Storehouse, Telephone System, Tivoli Guest House, and Water System. This, in addition to our other arguments, more than justifies the deletion of depreciation and interest from the employees service activities.

The General Accounting Office annual audit for the fiscal year ending June 30, 1952, has not been made available to us as yet. Therefore, we are unable to comment on the several recommendations which they informed the Senate Appropriations Committee they would make. However, it is hoped that the position of the United States employee is considered before making any change which would increase his cost of living. I believe I am correct in stating, in answer to one suggested recommendation made before the Senate Appropriations Committee, that the company representative answered to the effect, we don't pay the employees that much, meaning the additional cost would be greater than our salary. To increase our salary to allow us to pay the additional cost would be only taking it out of one pocket and putting it into another.

It has been stated that we have socialism on the Canal Zone. What else can be expected in an organization where there is only one source of income, namely tolls. The other money only circulates between the company and the employee. If they give us an increase in salary the company costs increase so they charge us more for what we buy from them, thereby getting the money back. It's just a circle.

Mr. Riley of the American Federation of Labor has a few points which he would like to call to the committee's attention.

Mr. HAND. Thank you very much, Mr. Munro. (The matter submitted for the record by Mr. Munro is as follows:)



Mr. Chairman, my name is Howard E. Munro. I appear here today as the legislative representative of the Canal Zone Central Labor Union and the Metal Trades Council. I have been an employee of the Panama Canal Company and lived on the Canal Zone since May of 1943; a few days short of 10 years. At present I am on leave without pay from the Panama Canal Company.

The organizations which I represent are the central bodies of 26 unions affiliated with the American Federation of Labor. The membership of these unions are the United States citizens employed by the United States Government to operate and maintain the Panama Canal.

Our members are vitally interested in the whittling away over the years of certain treatment traditionally accorded to United States rate employees, doing

vital work in the Canal Zone. The Panama Canal Company Comptroller has stated he appreciates this condition and has given it considerable study and contemplated making recommendations on it to the Company's board of directors. However, no remedial action has been noticed by the employees to date.

It is apparent that the Company's attitude has been formed by the Bureau of the Budget, predicated on the desires expressed in the past by former civil functions appropriation committees.

It is readily understandable how certain opinions can be formed when the complete picture has not been made available.

It is my position today to bring before this committee the detrimental, and what the employees consider unfair, accounting practices of the Panama Canal Company.


The Canal waterway was built to connect the two oceans. The United States Government's part in this project, when it was started, was twofold: Defense and commercial. The taxpayers of the United States furnished the capital to finance this huge project. Every year, since the Canal was opened for traffic, the Canal has paid into the Treasury of the United States, interest on this investment. By Public Law 841, 81st Congress, the rate of interest that must be paid into the Treasury is set by the Secretary of the Treasury. In addition to this, Public Law 841, 81st Congress provides that the Panama Canal Company shall be self-supporting. Here we have one of the very few Government owned and operated corporations which is self-supporting and returning the required interest to the United States Treasury. This is done from the commercial angle of the Canal.

The suggestions I will make will not in any way change this. The Panama Canal Company will still be self-supporting and pay the required interest into the United States Treasury. The change will merely be a change in accounting methods which will place certain charges where we believe they should be, at no cost to the taxpayer.

No income is derived by the Panama Canal Company from the defense angle of the canal, except the moneys credited the Company from the transit of Government ships.

The value of the canal to defense has been the subject of much debate. It has been said that both sides of this argument have been upheld by the same person. Therefore, I will withdraw from this controversy by stating that the employees do not feel that they should bear the complete burden of the defense angle by the apparent policy of not desiring to raise tolls in the face of rising operating costs.

EMPLOYEES In order to build, operate, and maintain the canal, it is necessary to have workmen. The range of workmen required to do this task covers the complete scope from the lowest type of laborer to the highest skill available.

During the construction days, wages as high as 100 percent above wages paid in the United States were necessary to obtain the type of workmen required.

When the construction period was ending and the labor force was changing to a maintenance and operating force, certain inherent characteristics of the location of the canal were recognized by the Panama Canal Act (37 Stat. 560, 569) which was approved August 24, 1912, when the basic wage paid was set not to exceed 25 percent above that paid for similar work in the United States. The 25 percent was not a cost-of-living increment, as some look on it today, but a decrease in wages from as high as 100 percent.

The same conditions prevail today as prevailed in 1912, namely:
1. The employee leaves the United States.
2. He leaves his family and friends.
3. He severs his business connections and soon loses contacts.
4. He enters the Tropics, a climate he is not equipped for.

5. Because of the climate, he must take costly extended leave in a temperate climate at least every 2 years.

6. His existence is narrowed down to a very small circle by the small communities he must live in.

7. His family will be broken up as his children reach post-junior-college age. They must return to the United States for completion of their college work. If they are not college material, they must return to the United States to obtain employment, as the local employment opportunity is far below the needs.

8. He cannot purchase his own home and during his working years make this his castle.

9. On retirement he must again sever his friendly ties and return to the United States.

10. He must have saved enough during his working years to establish himself in a new community.


Whenever you have workmen you must also have certain other facilities such as houses, stores, schools, medical service, police and fire protection, sanitation and recreation facilities. These appurtenances are as necessary to the operation of the canal as the lock gates and the lock locomotives. Therefore, we believe the basic costs attributed to these appurtenances should be borne by the canal activities the same as the costs of the lock gates and lock locomotives. By basic costs is meant depreciation, interest, general and administrative costs, and the Canal Company's so-called "employment costs."


I should like to discuss certain aspects of the Canal Zone which I believe are necessary in order to understand the United States citizen employees' position on the Canal Zone.

The geographic location of the townsites and the distribution of population offer many interesting problems when studying the Canal Zone. The Canal Zone has many times been considered as one city of 50,000 population. This is an error. It has been stated before this committee that the Canal Zone consisted of 648 square miles and a population of 50,000; approximately 50 percent Panama Canal Company and Canal Zone Government employees and families and the balance civilians affiliated with the military forces, but excluding the officers and enlisted men.

The 1951 census of the Canal Zone taken by the Canal Zone police indicates there are 32 townsites and 4 rural districts with a population of 41,086.

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Hospital and medical care at the present time on the Canal Zone are not satisfactory to the employee. From time to time the employee has heard it said that there is a duplication of hospital service, but it must be remembered that the military medical facilities are off limits for all civilian employees, including those working for the Army, Navy, and Air Force. Gorgas Hospital, while staffed with military doctors, is at least operated as a civilian hospital where accommodations are available to all regardless of rank. Any move to militarize the hospitals on the Canal Zone would be unfair to the civilian and would bring vigorous protests. The employees on the Canal Zone are recruited from civilians

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