The Secretary of State to the Secretary of Defense (Forrestal)


Dear Forrestal: You will recall that, pursuant to the interest of the President, arrangements were made by the State, War, Navy and Labor Departments for Brigadier General Frank McSherry (ret.) to spend four months last year in the Canal Zone studying problems arising from United States Government labor relations. On June 1, 1947 General McSherry submitted a detailed report which offered evidence of both official and unofficial discrimination against Panamanians [Page 681] in the Zone. In his report General McSherry made definite recommendations for reforms, emphasizing that his proposals were confined to those deemed practicable and capable of early implementation without undue shock to the established patterns of social and economic relations.

I have been impressed by the objectivity of the McSherry report and, through personal conversation with General McSherry, by his conviction that continuance in the Canal Zone of outmoded labor practices is harmful to the national interest. Moreover, I have become convinced that Panamanian resentment over certain United States Government employment practices in the Canal Zone is a primary cause of difficulty in this Government’s political relations with the Republic of Panama and an important background factor in the rejection last December by the Panamanian Assembly of the Defense Sites Agreement signed by our two governments.2 The attitude of resentment and feeling of discrimination on the part of the Panamanians concerning certain of the existing employment regulations also have the effect of making more difficult other negotiations with Panama, such as arrangements for adequate security control over civil aviation and radio on the Isthmus.

Complaints on this subject presented officially by Panama at international conferences have embarrassed this Government, and the Panamanian Government has recently renewed its charges that the United States Government employment practices in the Canal Zone not only admit discrimination but are also at variance with the General Treaty of 19363 wherein the United States agreed to maintain equality of opportunity and treatment for Panamanians in the Zone. Not only the Republic of Panama, but all the other American republics regard United States activities on the Isthmus of Panama as an example of our treatment of citizens of other nationalities. The importance of the effect of our policies in the Canal Zone on our international position in this Hemisphere and in the United Nations should impel us to make every effort to make the Zone a showplace of American democracy in practice.

I am enclosing with this letter a memorandum which sets forth certain specific steps which I believe this Government can and should take without undue delay to carry out certain of the recommendations made by General McSherry. This action would not only reduce the basis for hostile criticism of United States administration on the Isthmus of Panama and contribute materially to the security of our position in Panama but it would eliminate the validity of the unfriendly charges made on this subject against the United States by anti-American elements throughout the Western Hemisphere. These [Page 682] changes would also bring Canal Zone labor practices into closer accord with our treaty commitments and with proclaimed national policies.

Faithfully yours,

G. C. Marshall


Subject: United States Government Labor Relations in the Panama Canal Zone.

Action has recently been taken in the Canal Zone to improve United States Government labor relations, principally by hourly wage increases for alien employees—granted to more than 15,000 of the 18,200 local employees of The Panama Canal and Panama Railroad—and the admission of Panamanian citizens to examinations for certain civil service positions in line with United States treaty commitments. In a sensitive area such as the Canal Zone, reforms must of course be gradual, and progress could probably not take place rapidly enough to satisfy the more willful critics of the United States. However, there are certain further steps which the United States Government should be able to take without undue delay in a forthright program to remove the basis for hostile criticism of United States administration on the Isthmus of Panama.

There follows a brief summary of some of the more apparent evidences of discrimination which now exist in United States employment practices in the Canal Zone, as discussed in the McSherry report. It would be very desirable to have these discriminations corrected as soon as practicable with full consideration for the possible advisability of carrying out some of these reforms gradually.

Gold–Silver Roll. According to the McSherry report, at present the principle of equal pay for equal work is not used in the Zone, particularly in the organizations of The Panama Canal and The Panama Railroad. The following comparisons of monthly pay rates for gold and silver roll employees (practically speaking, United States citizens and alien employees) with comparable duties indicate relatively wide inequality.

Gold Silver
Carpenter $300 plus $95
Painter 300 plus 95
Policeman 300 80
Foreman 250 100
Motion Picture Operator 250 95
Chauffeur 240 95
Baker 225 100
Watchman 210 75
Saleswoman 175 75
Teacher 325 110
[Page 683]

In many of these categories there appears to be little room for differences in skill of performance. The United States is criticized frequently and bitterly by foreign officials and individuals for maintaining this system. Allegations are frequent that the purpose is primarily to enable national and racial discrimination, and the situation provides opportunity for exploitation by communist and other anti-American elements. The Department has been informed by the American Federation of Labor’s expert on inter-American labor matters that the discrimination in the gold and silver roll is the one point of criticism of our labor policies in the Canal Zone on which the Federation has no adequate answer to communist attacks.

General McSherry has recommended that The Panama Canal and The Panama Railroad abolish gold and silver roll titles and establish a single wage structure. This appears technically practicable and would accomplish more in the way of eliminating criticism of United States personnel practices in the Canal Zone than any other single step. Such a change need not mean the payment of United States wages to all silver roll employees, nor does it envisage the abrupt elimination of segregation in a manner offensive to established social patterns, but would merely mean that equal performance would be rewarded with equal compensation. It would be anticipated, of course, that due allowance would be made for the more economical circumstances of those living at home in their own national environment as compared with those who have gone abroad from the United States to work in the Zone.

Leave Privileges. According to the McSherry report, the gold roll employees receive 40½ days of leave per annum cumulative to 90 days. Silver roll employees are credited with 24 working days of sick leave per annum. Silver roll employees are not allowed to take rest leave until they have accumulated in excess of 30 working days, and then only to the amount of their credit above 30 days. General McSherry recommended that leave privileges of silver roll employees be adjusted to equal those of United States Government employees elsewhere.

Retirement. The Canal Zone Retirement Act is somewhat more liberal than the United States Civil Service Retirement Act, but it applies only to gold roll employees. The McSherry report indicates that silver roll employees receive no retirement benefits and that even those few non-United States citizens on the gold roll are treated for retirement purposes as silver roll employees. The latter participate in a cash relief program which provides monthly payments of $1.00 for each year of service with a $10 minimum and $25 maximum. General McSherry recommended that silver roll employees be placed under the Civil Service Retirement Act. The Act authorizes such action and the taking of this simple step would mean that charges of discrimination in the matter of retirement would no longer have real basis.

  1. See Foreign Relations, 1947, vol. viii, pp. 881 ff.
  2. Department of State Treaty Series No. 945, or 53 Stat. 1807.