The Foreign Service Act of 1980, originally applauded as a major step toward bringing American diplomacy into the modern age, has come under fire from many veteran diplomats as "an act of suicide" that threatens to destroy morale among the 4,000 members of the career Foreign Service.

And the State Department, long stereotyped in the public's mind as a realm inhabited by dignified men in striped pants, has been gripped by arguments over promotions and job security that increasingly sound like the labor-management disputes of blue-collar industry.

At issue is the Reagan administration's use of the law to overhaul the personnel system in accordance with a principle known in ear-jarring bureaucratese as "throughput" or "flow through." Its aim is to trim the higher ranks of the service by forcing large numbers of senior officers into involuntary retirement at a relatively early age.

Secretary of State George P. Shultz and his undersecretary for management, Ronald I. Spiers, while acknowledging that this is "a traumatic situation" for the people affected, insist that their approach is necessary to ensure that the country will have a streamlined and efficient Foreign Service with the most capable officers at the top.

Spiers says frankly that the goal is to "redesign" the Foreign Service along the lines of the armed forces, where a rigid up-or-out promotion system enables competent officers to have a career of roughly 20 years, but allows only a select few to stay longer and compete for a general's or admiral's stars. In his view, the Foreign Service must follow a similar weeding-out process to select those eligible for the small number of ambassadorships and policymaking posts at the top of the diplomatic pyramid.

However, many career diplomats and their bargaining agent, the American Foreign Service Association (AFSA), argue that this system not only treats them unfairly but also works against the national interest.

In personal terms, they say, the system could cause severe hardship for many in their late 40s or early 50s who joined the Foreign Service under the old rules that permitted longer careers and now face the prospect of being forced out. Foreign Service officers, they point out, encounter smaller pensions and fewer job prospects than military officers retiring at a similar age.

More importantly, they contend, the promotion system is based on imprecise criteria that favor managerial experience over specialized training in traditional diplomatic fields -- political, economic, cultural and language knowledge. They say the country is in danger of losing this expertise because those who have it will be gone and younger officers will be unwilling to risk their promotion prospects by taking nonmanagement assignments.

Ironically, when Congress passed the Foreign Service Act six years ago it was responding, in part, to calls from career officers to do away with a more mechanical promotion system and provide junior and middle-level officers with greater opportunities.

According to AFSA and its proponents, the law's flexibility in making promotions has been used to erect a system that emphasizes getting the majority of officers out of the service and into retirement in the shortest possible time.

In broad outline, the system gives the 150 to 250 officers accepted into the service annually three or four years to pass a "junior threshhold" and achieve FS-3 rank. From that point, they theoretically have 20 years to win promotion through the ranks of FS-2 and FS-1 and into the elite Senior Foreign Service.

At some point after reaching FS-1 rank, all must enter the competition for the senior service -- a process known as "opening a window." They can do that immediately after becoming an FS-1 or elect to wait for three or four years. Once an officer opens the window, he or she must make it into the senior service within six years or else retire. Special extensions are rarely granted.

This system has now been in effect long enough to begin to affect a large number of officers who have reached their late 40s and early 50s -- and the end of their allotted competition time. Some will have used their full 20 years; and some, who opened their six-year windows immediately after winning early promotion to FS-1, will have had fewer years of service.

But all will be facing what Spiers bluntly calls "sudden death overtime." And, he adds, a large number won't make it.

"We estimate that this year and the year after there will be 225 mid-level officers who will fail to be promoted into the Senior Foreign Service," he said in an interview. "Many are friends of mine. Many are people with kids in college and high expenses. It will be a very difficult thing for them and the service. But there just isn't room, and if we tried to go another way, we would have to do things that are unfair and cause hardships for others."

Those who do win senior status will find themselves beginning a new and even more intense competition. Those who hold the rank of counselor (the lowest in the SFS) must be promoted within seven years to the rank of minister, and within five more years to career minister. A career minister has four years to make the super-exalted rank of career ambassador, which now is held by only five people.

The positions for which senior officers will be competing are ambassadorships and jobs of assistant secretary rank, posts that the Reagan administration has been filling with unusually high numbers of political appointees. Although the numbers have fluctuated during President Reagan's tenure, there have been times when roughly half of his ambassadors came from outside the Foreign Service.

Gerald Lamberty, a career officer who is president of AFSA, contended that the shrinkage of openings at the top does not justify forcing people out early. The State Department, he said, still has lots of ways to make use of their accumulated expertise.

"Our estimate is that in the three years from 1986 through 1988, one third of the top-ranking officers in the Foreign Service will be forced to retire. If we bring 250 new recruits a year into a service of 4,000 people, the combined results of pressure from the bottom and lopping off at the top will mean that 2,000 people will be forced out in one way or another. So in 10 years, we will have a corps where half of the members have an average of less than five years of experience."

What most officers find particularly galling, Lamberty added, is a tendency to give promotion preference to "people who have managed something" while downgrading the analytical skills and country or area specialization that long were regarded as most important.

"No one wants to serve as the political or economic counselor at overseas embassies, because these are not management jobs," he said. "No one is going to be willing to spend two or three years learning Chinese or Japanese, because it's likely to be regarded as dead time when you come before a promotion board. The word in the corridors now is get a job managing something and forget everything else, or you're dead."

In reply, Spiers said, "If that's true, then the system is working. In the past, the main complaint was that only political officers got ahead. They do very important work, but a lot of them are lousy managers. We have tried to change the stress to get the word out that it's not enough to be a brilliant analyst. If you want to go up, you have to get management experience, because that's what an ambassador or a deputy chief of mission is -- the manager of a large and complex organization."

"What we have to do," he added, "is to create a system of ticket-punching incentives that will do away with the old method of having officers concentrate on one area or one specialty and instead have chances to get experience in the entire range of political, economic, administrative and consular work. There should be a role at the senior level for everyone from administrators to specialists in critical languages."

However, as Lamberty and others noted, that kind of broad-gauged approach doesn't yet exist. In the meantime, one disgruntled officer said, "We have a system where Shultz and Spiers are panning for gold. They're looking for star-quality people like a prospector looks for nuggets. What they've overlooked is that if you put a lot more stuff down the sluice, you have a better chance of finding more nuggets."