As teen-agers in the late 1960s, Charles Walker and Olin Smith worked side by side in a chemical plant here, dumping barrels of brownish powder into huge vats and then cleaning up the grime and dust after the chemical reaction produced textile dyes.

Workers griped among themselves about conditions in the dusty mixing room that they called "the hole." But it was not until last week, more than 15 years later, that Walker and Smith, now in their 30s, said they learned from a television news report that the chemical powder was beta-naphthyalamine (BNA) and that it can cause cancer and related diseases.

The federal government has the names of as many as 250,000 others who may face increased risk of cancer, heart disease and lung disease from work-place exposure to toxic substances such as BNA, asbestos, polyvinyl chloride and dozens more. But the government has declined to notify these workers, although in some cases early notification could mean the difference between treating the illness or being too late, according to doctors and government officials.

Federal health officials have avoided the "worker notification" program for several reasons, including the substantial cost, the confusion in some industries about whether the medical dangers justify a government warning, and the fear that notification will create more chaos than cure by alarming communities.

The case of Walker, Smith and their employer, the Synalloy Corp. of Spartanburg, is just a small example of a far broader medical, legal and political problem. It presents ethical and financial questions that have been studied intensively within agencies of the Department of Health and Human Services.

In microfilmed and computerized records in federal offices in Cincinnati, the government has the names and Social Security numbers of workers who -- usually without their knowledge -- were part of 66 "mortality studies" and other medical research conducted by the National Institute for Occupational Safety and Health, a division of HHS. The studies, which employers are legally required to allow, were done to determine the dangers of potentially lethal substances and proper methods to regulate them.

Smith and Walker say they have had urinary problems in recent years but do not know why. Last week, however, they learned that their chances of contracting bladder cancer may be up to 100 times greater than normal.

"Feels like you're a walking time bomb or something . . . , like you don't know when you're gonna catch it," said Smith, 37, at a meeting here Saturday of 50 concerned workers and church and community leaders. " . . . They ought to be telling people."

The question of whether to notify workers, which ones to notify and how to tell them is a complex issue that federal health officials have studied for nearly a decade without resolving.

"I think this is intolerable," said Dr. Anthony Robbins, who strongly supported a proposed "worker notification" program as NIOSH director from 1978 to 1981. Robbins said he believes that only some of HHS' objections are based on valid medical questions.

"I think the administration has opposed this because it would have generated much more occupational health research, and much more attention to what people are exposed to . . . , and I think that is exactly what a pro-business administration did not want," Robbins said.

Dr. Edward C. Brandt, assistant HHS secretary for health until his resignation Jan. 1, said budget cuts were a prime reason for scrapping the program. He disputed criticisms of HHS, saying medical evidence is often too shaky and NIOSH's proposed notification methods too imprecise to justify a full-scale notification.

"When the evidence is not totally clear, do you just go in and scare the hell out of everybody?" Brandt asked. "It is like yelling 'Fire!' in a crowded theater. All of us are exposed to toxic substances every day, and if people told us every day, we would just worry all day."

Last October, Ralph Nader and Dr. Sidney M. Wolfe, director of the Public Citizen Health Research Group, released internal HHS documents that they said suggested that HHS did not fund a $4 million plan to begin notification because of strong reservations about the cost and about potential impact on employers.

"It is unconscionable not to notify these workers . . . . It is a simple human decency issue," Wolfe said in an interview.

The problem is partly that opinions differ about how much medical evidence is needed in each of the 66 studies before workers should be told they are in danger. Concern over who will pay millions of dollars in medical costs and probable legal actions triggered by such notification is dramatically magnified when officials consider that millions of workers who were not part of NIOSH studies have been exposed to the same substances.

In past studies, NIOSH has shared results with companies, unions, trade and medical groups -- but not with workers. In some cases, firms and unions tell their workers, but NIOSH said many are never informed, especially if they are nonunion and if they leave their jobs.

The Centers for Disease Control, NIOSH's parent agency, presented the notification issue to its Ethics Advisory Committee in 1983. The committee concluded that, despite having no legal obligation, "NIOSH does have an ethical obligation to inform, particularly when NIOSH is the exclusive holder of data, or when there is clear evidence of a cause-and-effect relationship between an exposure and a health risk," according to an internal draft report.

But only once -- after news media reports and congressional pressure in 1977 -- did NIOSH run a "pilot" notification -- in Augusta, Ga., where more than 1,000 workers may have been exposed to BNA between 1946 and 1972, when its production was halted.

The plant, Augusta Chemical Co., also owned by Synalloy, was selected because BNA is one of the most potent known carcinogens and because bladder cancer is treatable if detected early, according to Paul Schulte, the NIOSH epidemiologist who directed the $300,000 notification and medical screening program that began in 1981.

Using records of Social Security, the Internal Revenue Service, motor vehicle registries and other agencies, NIOSH was able to notify by mail 849 of 1,100 surviving workers, including 238 who had moved.

According to results published in this month's Journal of Occupational Medicine and in NIOSH documents, the notification and testing showed 15 cases of bladder cancer and 26 more "suspicious or suggestive of a precancerous condition," Schulte said.

For a sample the size of that of Augusta Chemical, he said, the normal incidence of bladder cancer would be only three cases. For Augusta workers, NIOSH said, the chances of cancer are four to five times greater than normal, but 111 times normal for blacks exposed for 10 years or more -- like Smith and Walker.

Those disease rates inevitably will rise, because BNA's latency period is about 20 years, Schulte said. Past studies have shown that 30 to 70 percent of those exposed eventually contract cancer.

"I believe government has a responsibility to tell people," said Schulte. "It changes people's lives forever to be labeled 'high-risk' but it can be done conscientiously and responsibly after there is really a determination that you have a notifiable risk."

"I don't know what the furor is about," said Kenneth Foster, president of the Spartanburg-based Synalloy chemical division. Foster, who said he worked with BNA in the lab, said he believes the risk is exaggerated. NIOSH said as many as 100 workers were exposed, but Foster said only about 25 workers handled BNA, as opposed to Augusta, where it was manufactured. "We also had good work habits" that minimized the danger, (National Caucus of Labor Committees photo) in 1972, also provides yearly urine testing, which Foster said has turned up no problems yet.