In my brief prepared statement, I propose to describe the Canal Zone, the Government and private employment therein, and the pay structure applied to employees of the Panama Canal Company and the Canal Zone Government.

The Canal Zone is roughly 10 miles wide and 50 miles long. Under the 1903 treaty by which it was acquired from the Republic of Panama, the United States exercises all sovereign right, power, and authority within the Canal Zone. Congress is the legislature for the Canal Zone. There is no local legislature.

Under our treaties with Panama, activities in the Canal Zone are, in general, those related to the United States governmental function of maintaining, operating, and protecting the Panama Canal.

There is no indigenous population in the Canal Zone, and there is very little private business enterprise. Under the treaties, only certain categories of persons may reside in the Canal Zone, principally persons in the military or civilian service of the United States Government and their families. Also under the treaties, no private business enterprises may be permitted to be established in the Canal Zone except those having a direct relation to the operation, maintenance, sanitation, or protection of the canal, such as those engaged in the operation of cables, shipping, or dealing in oil or fuel.

The civilian population of the Canal Zone is about 40,000. Of these about half are United States citizens, and the rest are non-United States citizens, principally Panamanians.

The total number of persons who work in the Canal Zone, regardless of whether they live in the zone or in the Republic of Panama, is about 25,250. I submit for insertion in the record a summary of this civilian work force in the Canal Zone.

Mr. ELLIOTT. Without objection, the summary will be made a part of the record at this point.

(The summary referred to is as follows:)

Summary of civilian work force in the Canal Zone

Mr. RUNNESTRAND. The breakdown shown on that summary indicates that, of the 25,000, over 15,000 are employees of the Panama Canal Company and Canal Zone Government, and nearly 7,000 more are employees of the Army, Navy, and Air Force. Another 274 are employees of other United States Government agencies, and nearly 1,200 are employees of Army, Navy, Air Force post exchanges and similar quasiofficial agencies. The strictly private employment in the Canal Zone is therefore limited to the 1,225 contractors' employees, 368 employees of the few commercial firms such as the ships agents, oil companies, cable company, and so forth, and about 100 employees of churches, welfare organizations, and other noncommercial enterprises. The summary gives a further breakdown of these figures as between United States citizens and non-United States citizens.

Mr. ELLIOTT. Let me interrupt you, Mr. Runnestrand. As I read this "Summary of Civilian Work Force in the Canal Zone"-1,187 employed contractors-I guess this is as of December 1955.

Mr. RUNNESTRAND. Yes, sir.

Mr. ELLIOTT. And does that include all persons employed at that time, or does it include those employed for the entire year of 1955?

Mr. RUNNESTRAND. That's as of that time. I wanted to interject there each of these figures-and that one particularly-is a figure taken as of our records at the end of the month. That one in particular will be a moving figure. At the middle of the month, contractors may have had more or less on their rolls, so at any given date the figure would change of course, depending on normal contract work currently in force. Our latest available compilation dealt with the end of this last December for that figure.

Mr. ELLIOTT. Would you say that's a representative figure, Mr. Runnestrand? If we took the figures for the month of February, we will say, would it run much above that, or much less than that figure of 1,186?

Mr. RUNNESTRAND. If I may, I would like to ask Colonel Arnold, who is our Engineering and Construction Director, and who is contracting officer, to answer that question.

Mr. ELLIOTT. Yes.

Colonel ARNOLD. I'm Col. Hugh M. Arnold, Director of Engineering and Construction, Panama Canal Company.

Our construction work varies with the season, of course, and the dry season runs from about the middle of December to about the middle of May; so a December contracting employment figure would be probably slightly lower than February, March, or April.

Mr. RUNNESTRAND. By the same token, perhaps it would be a little higher than October and November, which is the middle of the rainy

season.

Colonel ARNOLD. Maybe a little.

Mr. RUNNESTRAND. Government employment, which is excluded from the application of the wage-and-hour law, therefore covers over 93 percent of the employment in the Canal Zone. Of the 1,700, or 6.7 percent, employed by contractors, commercial firms, and churches and like organizations, 1,464 are non-United States citizens, practically all of whom live in the Republic of Panama. I assume that only a part of these private employees would be subject to the Fair Labor Standards Act, since its application is understood to extend only to employees engaged in commerce or the production of goods for commerce. This

presumably would exclude the 100 or so church and welfare workers and part of the contractors' employees.

It therefore appears that the potential application of the Fair Trade Labor Standards Act in the Canal Zone covers only a few percentage points of the 25,000 employed persons in the Canal Zone, certainly substantially less than the 6.7 percent which represents the total private employment of all classes in the Canal Zone, at least as shown after the dates in this summary.

The Panama Canal Company, which is the corporate agency of the United States charged by Congress with maintaining and operating the canal and related facilities, and the Canal Zone Government, the agency which administers governmental functions in the zone, are the dominant employers in the Canal Zone. These two agencies are closely integrated in organization and management. They employ about 60 percent of all employed persons in the zone, and about 65 percent of all Government employment in the Canal Zone.

The Panama Canal Company and Canal Zone Government employ 3,788 United States citizens in the Canal Zone and 11,285 non-United States citizens-a total force of 15,073. Those figures are as of February 1956. Of the 11,285 noncitizens, about 8,000 are citizens of Panama, the majority of the others being West Indians. Most of the United States citizens live in the Canal Zone. All but about 3,000 of the non-United States citizens live in the Republic of Panama.

The pay structure for Panama Canal Company and Canal Zone Government employees is initially divided into two main divisions, one covering positions for which it is necessary to use the continental United States as the basic area of recruitment in filling jobs, and the other covering positions which can be filled by recruitment from the Panama area labor market.

Positions for which the continental United States is the basic recruitment area are necessarily compensated at rates based on those for comparable Federal or private employment in the United States. In general, an additional 25 percent is added as an overseas and tropical differential. The pay rates of the Classification Act of 1949, as amended, are by law or administrative action applied to about 1,600 of these positions.

Mr. ELLIOTT. Now, 1,600 out of a total of what?

Mr. RUNNESTRAND. Out of 3,788-approximately that number. Those are the United States citizens and the few non-United States citizens who are paid at continental rates.

Mr. ELLIOTT. About 40 percent.

Mr. RUNNESTRAND. I believe so.

Another 1,250 or so, of the same total number, are in the so-called wage-board group, covering the craft and craft supervisory positions. An administrative group covers pilots, policemen, firemen, and teachers. In other words, those groups I have just mentioned are those which are paid at rates comparable to rates paid in the continental United States for comparable work.

No pay rate for these United States recruitment area full-time positions is less than $1 an hour. For these employes the average hourly rate is $3.15 and the average annual salary is $6,546. The lowest

hourly rate paid in any such regular full-time position is $1.78. We have a few special positions, like interns at the hospitals who get a special type of stipend, which runs around $1.50 when converted to hourly rates. We have a first-year apprentice who, in our 4-year apprentice training program, gets more than $1 but less than $1.78. This is for any regular, full-time, ordinary employment.

For the more than 11,000 positions for which the basic recruitment area is the Panama labor market, pay rates are based generally on the prevailing rates for comparable work in that area. As a matter of fact the United States agencies' pay schedule for such positions is conceded to be somewhat higher than the going rates in Panama.

The current rates of pay on the local-rate pay schedule range from 41 cents to $1.59 an hour.

The locality-rate employees are paid within this range in accordance with a point-evaluation plan developed in 1947 in collaboration with the Bureau of Labor Statistics of the Department of Labor. The plan currently consists of 15 grades, each with 6 longevity steps, and the grading system is coordinated among four occupational categories: (1) manual occupations, (2) service occupations, (3) clerical occupations, and (4) subprofessional occupations.

The average hourly wage paid to the locality-rate group is 64 cents. Each individual job designation in the locality group is indexed in the agency's personnel manual and indicates the grade to which it has been classified.

If the committee desires, I shall be glad to furnish for the record the locality pay schedule and any other statistical data you indicate would be helpful.

That completes my prepared statement. I shall be glad to try to answer any questions.

Mr. ELLIOTT. Mr. Runnestrand, I think it would be helpful to the committee if you would furnish for the record the locality pay schedule that you referred to in the next to the last paragraph of your statement.

(Mr. Runnestrand presented the schedule to the chairman.)

Mr. ELLIOTT. And without objection this pay schedule will be made a part of the record at this point.

(The pay schedule referred to is as follows :)

CHAPTER C3.-Compensation-Rates of pay (local rate rolls)

1. Pay schedule. The following table shows the hourly and biweekly rates of pay for employees of the Canal Zone Government and the Panama Canal Com pany, by grades, for employees carried on the local rate rolls:

1.1

CHAPTER C3.-Compensation-Rates of pay (local rate rolls)

Pay schedule. The following table shows the monthly rates of pay for employees of the Canal Zone Government and Panama Canal Company, by grades, for employees carried on the local-rate rolls whose basic work-week is 48 hours:

1 Company-Government minimum monthly rate is $85.28 a month (48-hour-a-week basis). Effective date: Apr. 4, 1954.