Beware the Mean!

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					                                                                                 No 81 May 2002

the Mean!
by Peter Saunders and Tim Smeeding

   The title of this paper is taken          Our aim here is to clarify some of
from an article by the American          the underlying conceptual issues in
economist Joseph Quinn (1987) on         poverty measurement and bring
measuring the economic well-being        some new data to bear on the
of the elderly. The message he sent      problem. We do not think that
in this paper that mean incomes are      debating such issues should be a
not always the best measure of well      substitute for action, but rather that
being for two reasons: first because     definitions are an important part of
the ‘mean’ income is not the income      the process of deciding when action
of the average person—in fact no         is needed and what form it should
one may have that income at all.         take.
And second because means are                 The basic point made in the CIS
misleading measures of well-being        report is that, by using a poverty
when the dispersion around the           line set equal to one-half of mean
mean is very wide. This message          income rather than the more
bears repeating here in light of the     common measure based on one-half                                 Tim Smeeding, Visiting Professor to SPRC, at the
recent criticism by the Centre for       of median income, the NATSEM                                     ‘Ageing Societies’ Seminar
Independent Studies (CIS) of the         estimates exaggerate both the                                    person or middle household, and
poverty estimates produced for The       poverty rate in 2000 and the                                     separates the distribution into two
Smith Family by the National Centre      increase experienced over the                                    equal halves) is lower than mean
for Social and Economic Modelling        1990s. The figures published by                                  (or average) income, so that a
(NATSEM). The ensuing controversy        The Smith Family confirm that this                               poverty line linked to mean income
has re-ignited the debate over           is indeed the case. The former                                   will always be higher and more
measuring poverty – a debate that is     result is virtually guaranteed by the                            people will fall below it.
important, because good measurement      fact that the distribution of income                                The second observation – that
of the scale of poverty and how it has   is skewed to the right, with many                                use of a poverty line linked to mean
changed is an essential ingredient       people on low-to-modest incomes                                  income produces a higher increase
into designing policies that address     and far fewer on high incomes.                                   in poverty – is generally only true
the forgotten problem that poverty       This implies that median income                                  when mean income increases by more
has become (Davidson, 2002).             (which is the income of the middle
                                                                                                                             Continued on page 4

                                         Staff and Visitors Update ............................2          Feature
                                         From the Director ..........................................3    Peter Saunders and Tim Smeeding
                                         Costs of Foster Care ....................................6       discuss the question of measuring
                                         Child Protection in China ..........................7            poverty
                                         From the Projects............................................8

EditorS     x   Karen Fisher, Cathy Thomson & Duncan Aldridge

  x   Registered by Australia Post                                        x    Publication No. NBP4766                               x   ISSN 1324 4639   x

                                                                                                                                       SPRC NEWSLETTER   x1
                                            STAFF                                       Staff and
                                                                                        Visitor Update
                                                                                        NEW ARRIVALS:
Director                                    Honorary Research Associates
                                                                                        MARILYN MCHUGH has moved from Staff to Research Scholar to take
Professor Peter Saunders                    Emeritus Professor Peter Baume
                                                                                        up an ARC/APAI PhD scholarship to study The Costs of Foster Care in
Deputy Director                             Dr Judy Cashmore
Professor Sheila Shaver                     Emeritus Professor Sol Encel
                                            Dr Sara Graham                              CHRISTIE ROBERTSON has taken up an ARC/APAI PhD scholarship to
Senior Research Fellows                                                                 commence a study into The Smith Family VIEW clubs of Australia: From
                                            Business Manager
Michael Bittman                                                                         Philanthropy towards Social Enterprise.
                                            Melissa Roughley
Dr Bruce Bradbury
Dr Tony Eardley                             Office Manager                              CATHY THOMSON has returned from leave.
Karen Fisher                                Rosita Lang
Dr Natasha Posner                           Librarian                                   VISITORS:
                                            Katherine Cummings                          YUKI EBARA from Beppu University (Japan) visited the Centre from
                               Administrative Assistant                                 January to March 2002.
Professor Tim Smeeding
Associate Professor Yuki Ebara Duncan Aldridge                                          TIM SMEEDING (Maxwell Professor of Public Policy, Syracuse University,
Research Fellows               Research Scholars                                        USA, Director of the Luxembourg Income Study) is visiting the Centre
                               Linda Arnold                                             from January to June 2002.
Dr Jenny Chalmers
Gerry Redmond (on leave)       Lyn Craig
                               Amanda Elliott (part-time)                               DEPARTURES:
Cathy Thomson
                               Trish Hill                                               KIM JAMIESON has taken maternity leave.
Dr Robyn Dolby
                               Kim Jamieson (on leave)
Post Doctoral Fellows          Maria Mackell (part-time)                                YOUNGHEE NA has returned to Korea.
Dr Xiaoyuan Shang              Marilyn McHugh                                           GERRY REDMOND will be on leave for a further year as he continues in
Dr Saba Waseem                 Roger Patulny                                            his post at Innocenti Research Centre UNICEF, Florence.
Research Officers              Christie Robertson
                               Judy Schneider (part-time)                               JAMES RICE has left the Centre to complete his PhD studies full-time.
David Abelló
Judy Brown                     Nick Turnbull
Sharon Burke                                Social Policy Research Centre
Jude Eccles                                 Rupert Myers Building
Sonia Hoffmann                              (South Wing)
Carla Jannsen                               University of New South Wales
Justin McNab                                Sydney NSW 2052, Australia                                                          Parking Station
Kate Norris                                 Phone: +61 (2) 9385 7800
Peter Siminski                              Fax: +61 (2) 9385 7838
Jacqueline Tudbull                          Email:

The Social Policy Research Centre
    The Social Policy Research Centre is an independent
research centre of the University of New South Wales. Under
its original name, the Social Welfare Research Centre was
established in January 1980, changing its name to the Social
Policy Research Centre in 1990. The SPRC conducts research
and fosters discussion on all aspects of social policy in
                                                                                                                Village Green
Australia, as well as supporting PhD study in these areas. The
Centre’s research is funded by governments at both
Commonwealth and State levels, by academic grant bodies
and by non-governmental agencies. Our main topics of
inquiry are: economic and social inequality; poverty, social
exclusion and income support; employment, unemployment
and labour market policies and programs; families, children                                                                                 DE
and older people; community needs, problems and services;                                                                   PAR
evaluation of health and community service policies and                                                               NZ AC
programs; and comparative social policy and welfare state
   The views expressed in this Newsletter, as in any of the Centre’s publications, do   The Social Policy Research Centre is located on Level 3 of
not represent any official position of the Centre. The SPRC Newsletter and all          the Rupert Myers Building, South Wing, Kensington
other SPRC publications present the views and research findings of the                  Campus. Enter by Gate 14, Barker Street.
individual authors, with the aim of promoting the development of ideas and
discussion about major concerns in social policy and social welfare.

2x     No 81      x         MAY 2002
From the
by Peter Saunders
   Ageing has been presented as          involved (even if it takes
one of the most serious challenges       the form of caring for a
facing all societies over the coming     grandparent or delivering
decades. The extent of the               meals on wheels
‘problem’ has been extensively           voluntarily) and this has
documented and the need for an           flow-on consequences
effective and profound policy            that cannot be ignored.
response has been a constant                 The above framework
theme of the recent policy agenda.       can be used to trace the
But many of the assumptions on           development of the
which the predicted consequences         ‘ageing debate’. The
of an ageing society are based can       ‘first generation’ studies
be shown to be questionable at           that appeared in the
best, at worst simply wrong.             1980s made the point
   A simple framework for thinking       that demographic change
about ageing can be developed            was leading to an ageing process,         Presenters at the ‘Ageing Societies’ Seminar: (from
which is based on two important          reflected in a significant increase in    front left to right) Gary Burtless, Julia Perry, Michael
ratios. The first is the ratio of the    the (r/e) ratio resulting from the rise   Bittman; (back) Tim Smeeding, Peter Saunders.
number of people who have retired        in birth rates in the immediate           influences the age structure of the
from the labour force (r) to the         post-war period, reinforced by            population in the long-run.
number of workers still employed         increased longevity. Focusing                This in turn has focused
(e). The second is the ratio of the      exclusively on the cost to government     attention on what has caused the
cost of meeting the needs of each        implied by these changes, these           birth rate to decline and what
retiree (p) to the average wage of       early studies suggested that the          governments can do to try to
workers (w). The product of these        predicted rise in (r/e) would have to     reverse this trend. A central issue
two ratios, (r/e).(p/w) can then be      be offset by a fall in the (p/w) ratio    here is the degree to which the
taken to represent the overall           if the overall support cost was to be     costs associated with child-rearing
support cost burden associated with      stabilised. Responding to this            are shared between the parents,
a given population.                      simple message, governments               their broader families and the state
   This can also be expressed as         around the world (particularly in         (in the form of family benefits,
equal to the ratio of (r.p) to (w.e),    the OECD region) have heeded              access and affordability of child
where the numerator is equal to the      this warning by cutting back on the       care, and so on). It seems that many
cost of meeting the needs of all         generosity of pension schemes and         of the public policies introduced to
retires and the denominator is           seeking to control the growth of          cut spending programs as a
equal to the total wage bill from        health and care costs for the aged.       response the ‘ageing crisis’ may
which those costs must ultimately            The controversy induced by            have shifted these costs onto
come. In words, this latter ratio        these reforms has given rise to a         parents who have responded by
indicates what proportion of the         ‘second generation’ of studies            having fewer children (in total) thus
resources generated by the current       examining the factors behind the          further reducing the birth rate and
working generation must be put           ageing process and its implications       exacerbating the rate of ageing.
aside to meet the needs of the           for public policy. These newer               A second insight of the newer
current retired generation.              studies have shed a more                  studies is equally simple but again
   While almost all discussions of       interesting light on the issues of        has fundamental consequences. It
ageing implicitly assume that such       ageing, opening up new avenues of         relates to the role of the labour
‘putting aside’ only occurs through      inquiry and casting doubt on the          market in the ageing process. The
the public sector, this is by no         need for some of the ameliorative         age of retirement is not a universal
means the case. Many of the needs        steps already introduced. A key           given, but is the result of policies
of older people will be met by the       insight of these new studies is that      introduced and sustained over a
aged themselves, or by their             the main factor behind the longer-        long period. The point at which
families, or by a range of non-          run increase in the demographic           workers (e in the above framework)
government voluntary agencies.           ratio (r/e) is the fertility (or birth)   shift into retires (r) obviously has a
But there is still a resource transfer   rate, since it is this that ultimately                      Continued on page 10

                                                                                                                SPRC NEWSLETTER     x3
                       Beware the Mean!                                         continued
                                                                                from Page 1

                       than median income. This did in         observations. Thus, mean family          if the incomes of the poor rise
                       fact occur in Australia through the     income in 1990 (updated to year          (everyone else’s income unchanged)
                       1990s, but it is not inevitable. The    2000 dollars) was $766, while            this will cause mean income to rise
                       reason for this is that increased       median income (when similarly            and thus may result in measured
                       income inequality reflected large       updated) was $686. The ratio of          poverty rising – a curious result that
                       increases in the incomes of those       mean to median (a very rough             will not occur if poverty is measured
                       who were already at the top of the      measure of income inequality) in         relative to median income.
                       distribution (Saunders, 2001). This     1990 was thus 1.117. By the year             It is at this point in the argument
 “...the fact that     had the effect of increasing mean       2000, mean income had risen to           that we part company with the CIS
    one measure        income relative to the median, so       $832, median income to $723 and          authors, who argue that only an
                       that mean-income poverty rose faster    the ratio of the two to 1.151, or 3.0    ‘absolute’ poverty line measures
  shows a larger       than median-income poverty. The         percent above the figure for 1990.       ‘real’ poverty and avoids the need
increase over a        CIS conclude from this that The            Of course, none of these statistics   to make a judgment about the nature
                       Smith Family (and NATSEM) have          tell us whether it is better to base a   and definition of poverty. In fact,
  specific period      confused poverty with inequality        relative poverty line on mean or         there is no single absolute poverty
                       and are promoting a climate in which    median income. The fact that one         line that is acceptable in all times
       is hardly a
                       the ‘politics of envy’ (Hughes, 2001)   measure shows a larger increase over     and places. The World Bank uses
 sound basis for       is characterising the increased         a specific period is a hardly a sound    an ‘absolute’ poverty line of US$ 1
                       affluence of the rich (itself a good    basis for choosing it. We need to        per person per day in Africa, US$ 2
      choosing it.”    thing) as increased poverty of the      make a judgment about the relative       per person per day in Latin America,
                       poor (a bad thing).                     merits of alternative poverty            and US$ 3 per person per day in
                           The figures published in Table      measures that is independent of          Central Asia and the former Soviet
                       1 of The Smith Family report (on        what they imply for the poverty rate.    bloc. The United States has an
                       which the authors of the CIS study      One specific problem with measuring      absolute poverty line that is between
                       rely) bear out these statistical        poverty using mean income is this;       $10 and $15 per person per day
                                                                                                        depending on the size of the family
  Table 1: Poverty Rates using Mean and Median Income Poverty Lines*                                    for which poverty is being measured!
    Country     Year           Overall             Children                Aged           Ratio of      (Smeeding, Rainwater and Burtless,
                                                                                          Mean to       2002). The point here is a simple
                          Mean Median          Mean Median            Mean Median         Median        one: Any poverty measure must reflect
                                                                                          Income        some kind of judgement and the onus is
                                                                                                        on those who propose it to make these
    Australia 1981         15.4      11.3        17.0      13.8         41.4      24.0       1.10
                                                                                                        judgements transparent and thus open to
              1994         19.2      14.3        21.0      15.8         42.4      29.4       1.12       debate. Our challenge to the CIS on
              Change        3.8       3.0         4.0       2.0          1.0       5.4       0.02       this point is; show us an absolute
    Canada     1981        15.3      12.4        17.6      14.8         30.6       22.0      1.09       poverty measure that is totally free
               1997        15.0      11.9        19.1      15.7         16.9        5.3      1.11       of judgment so that we can judge its
               Change      -0.3      -0.5         1.5       0.9        -13.7      -16.7      0.02       merits for ourselves (pun intended!).
    France     1984        13.9      11.5        12.2       9.8         23.7      19.3       1.10           When it comes to choosing
               1994        12.7       8.0        12.7       7.9         17.3       9.8       1.16       between mean or median income as
               Change      -1.2      -3.5         0.5      -1.9         -6.4      -9.5       0.06       the basis for an explicitly relative
                                                                                                        poverty line, the vast majority of
    Germany 1984            8.8       6.5         8.7       6.4         14.4      10.3       1.10
                                                                                                        poverty researchers prefer the
            1994           10.1       7.5        13.0      10.6         11.2       7.0       1.11
                                                                                                        median. One reason is that when
            Change          1.3       1.0         4.3       4.2         -3.2      -3.3       0.01       the median is used , the reference
    Sweden     1981         5.8       5.3         5.1       4.8          3.8        2.9      1.04       point is the person, family or
               1995         7.2       6.6         3.0       2.6          3.9        2.7      1.05       household who is at the middle of
               Change       1.4       1.3        -2.1      -2.2          0.1       -0.2      0.01       the distribution, with half above
    UK         1979        13.4       9.2        11.9       9.0         35.9      21.6       1.10       and half below them. When the
               1995        21.8      13.4        29.9      19.8         28.6      13.7       1.19       mean is used, there may be no one
               Change       8.4       4.2        18.0      10.8         -7.3      -7.9       0.09       involved at all, as there may be no
                                                                                                        person, family or household or who
    USA        1979        18.2      15.8        23.4      20.4         31.7      27.3       1.09
                                                                                                        has this exact income. And as
               1997        24.4      16.9        31.7      22.3         30.8      20.7       1.21
                                                                                                        mentioned earlier, the income of
               Change       6.2       1.1         8.3       1.9         -0.9      -6.6       0.12       the person who is closest to the
    Simple Average                                                                                      mean income is considerably above
    of Changes              2.8       0.9         4.9      2.2          -4.3      -5.5      0.05        the income of the middle person.
                                                                                                            A second reason for preferring
    Note: * Poverty rates show the percentage of persons of each type below each poverty line.
                                                                                                        the median to the mean is because
    Source: LIS data base.
                                                                                                        the median is less sensitive to

 4x    No 81   x       MAY 2002
extremely high (and low) incomes      a poverty line for each country that     larger impact on estimated poverty
and is thus a more robust measure     is set at one-half of that country’s     among the aged than on child
of the central tendency of the        median income, derived after             poverty;
income distribution. Given that the   allowing for differences in household        • Poverty rates in the most
surveys that produce the income       size using an equivalence scale set      unequal countries (and the
data used to measure poverty often    equal to the square root of household    countries with the greatest trend to
find it difficult to measure very     size. For a sub-sample of seven of       inequality) – the UK and the US -
high and very low incomes             these countries, we have used the        are very high and vary widely when
accurately, measurement errors        LIS data to also estimate poverty in     the mean is used compared to the
have the potential to distort the     each country using a poverty line        median. In contrast, poverty rates
mean to a far greater extent than     set at one-half of mean income in        in the most equal nation - Sweden -
                                                                                                                       “...any poverty
the median (which depends only        each country. The results, shown in      do not vary nearly as much over         measure must
on the ranking of incomes, not on     Table 1, report the overall (national)   time or across different groups.
the level of any income except the    poverty rate, and separate poverty           The international data thus         reflect some
median itself). Even the              rates for children (aged under 18)       illustrate that where the poverty       kind of
Department of Social Security in      and the aged (aged 65 and over)          line is set influences not only the
the United Kingdom - one of the       using the mean and median income         overall level of poverty, but also      judgement and
few organisations that uses a mean-   poverty lines in each country. The       how poverty affects different
based measure to examine the
                                                                                                                       the onus is on
                                      two alternative poverty rates around     groups and how it has changed over
circumstances of low-income           1980 and in the mid-1990s are            time. Put bluntly, the use of a         those who
households - has acknowledged         shown, along with the change in          poverty line linked to mean income
that within quintiles at the          the ratio of mean to median income
                                                                                                                       propose it to
                                                                               produces excessively high poverty
extremes of the income                over the period.                         rates, that also tend to increase by    make these
distribution, ‘medians are                The countries included in the        more when poverty is rising but to
considerably less vulnerable to       Table cover the range of
                                                                               fall by less when poverty is falling.
sampling error and other data         experience captured in the LIS           The results reported in The Smith       transparent and
deficiencies’ (Department of Social   database. This is quite diverse, as      Family report confirm that
Security, 1996: 25).                  can be seen by comparing the                                                     thus open to
                                                                               Australian experience in the 1990s
Some International Evidence           results for Sweden with those for        conforms to this more general           debate.”
   It is useful to provide a new      the United States. Australia lies        international pattern.
perspective on this debate by         around the middle, with more
considering what the international    poverty than in continental Europe
                                                                                  Davidson, P. (2002), ‘A
evidence has to say on these issues. but less than in the United
                                                                               Frustrating Poverty Debate’,
To do this, we draw on data from      Kingdom and the United States,
                                                                               Impact, February, 1 and 16.
the Luxembourg Income Study           similar overall to Canada (aside
                                                                                  Department of Social Security
(LIS), a comparative study of         from poverty among the aged
                                                                               (1996), Households Below Average
economic inequality in different      which shows up as very high on
                                                                               Income. Methodological Review,
countries using data that conform to both measures).
                                                                               Analytical Services Division,
a standard conceptual and                 In choosing between the two
                                      poverty lines, the results reveal        Department of Social Security,
definitional framework. When the
                                      several patterns:                        London.
LIS data are used, we can be
                                          • As predicted, poverty is always       Harding, A., Lloyd, R. and
reasonably confident that any
                                      higher using the mean income             Greenwell, H. (2001), ‘Financial
differences that emerge are real,
                                      rather than the median, all else         Disadvantage in Australia 1990 to
and not the result of the
                                      equal;                                   2000. The Persistence of Poverty in a
peculiarities of specific national
definitions or data characteristics.      • The ratio of mean to median        Decade of Growth, The Smith
Both of the authors have been         income increased in every country,       Family, Sydney.
closely associated with the LIS       indicating that income inequality           Hughes, H. (2001), ‘The Politics
project for two decades, with one of rose in every country over this period;   of Envy. Poverty and Income
us (Smeeding) its instigator and          • Upward changes in mean-            Distribution’, Policy, 17(2), 13-18.
current Director and the other        income poverty rates are generally          Quinn, J. (1987), ‘Economic
(Saunders) the Australian coordinator higher than upward changes in            Status of the Elderly: Beware of the
and, for many years a member of       median-income poverty, although          Mean’, The Review of Income and
the LIS Executive Board.              the opposite is true when poverty is     Wealth, March 1987, 63-82.
   The LIS project publishes on its falling, when median-income based             Saunders, P. (2001), ‘Household
website a range poverty rates fall by more than             Income and Its Distribution’,
of indicators of income inequality    mean-income based poverty;               Australian Economic Indicators, June
and poverty in all participating LIS      • Except in France, the shift        2001, Catalogue No. 1350.0, ABS,
countries (of which there are now     from a median income poverty line        Canberra, 33-55.
27). The poverty rates are based on to a mean income poverty line has a                         Continued on page 12

                                                                                                           SPRC NEWSLETTER     x5
                     Costs of Foster Care
                     – A National Study
                     by Marilyn McHugh
                        Since the mid-eighties there has          The project was conducted in           • In the energy budget there
                     been concern among major foster          two stages. Stage I involved a          were additional costs for laundry
                     care organisations in Australia in       field-based study with 120 directors    purposes (heating water and
                     relation to the low level of             of child welfare agencies               running washing machines/dryers).
                     allowance (ie standard subsidy)          (government/non-government and          Higher than usual use of electrical
                     paid to foster carers to reimburse       Indigenous/non-Indigenous) and          appliances, lights, air-
                     them for the direct costs of care.       six Foster Care Associations around     conditioning/heating by children
                     Agencies were aware that unless          Australia. One of the strongest         and young people in care was also
                     the level of standard subsidy was        findings from the survey data was       noted.
                     increased there would be great           that standard subsidy payments in          • Estimates in the food budgets
                     difficulty in recruiting and             most States were perceived as           were closer to some carers’ actual
                     maintaining carers and also in           inadequate to meet the costs of         costs. However common patterns of
                     expanding the pool of appropriate        children in care.                       over-eating and/or stealing,
   “The rationale    carers.                                      In Stage II, a set of budgets       hoarding or hiding food led to
                        All Australian States and             estimating the costs of children of     higher consumption of some foods
   underlying this   Territories administer similar foster    various ages for housing, energy,       and significant wastage. To correct
                     care programs for children, with         food, clothing and footwear,            dietary deficiencies, under-weight
objective was to                                                                                      or ‘failure to thrive’, babies and
                     placements managed either by the         household goods and services
   provide better    statutory authority or by non-           (HGS), health, transport, leisure       children were encouraged to
                     government agencies. The number          and personal care were developed.       consume more appropriate foods.
  information on     of children in out-of-home care in       Use was made of the estimates of           • Clothing for children was
 the direct costs    Australia is considerable with 16 923    the costs of children, at the modest    costly. Children often had no
                     children and young people in care        but adequate standard, originally       clothing or footwear or had minimal
        to carers    for the year 2000. The majority          developed by the Budget Standards       wardrobes of poor quality and
                     (15 169) of children in out of home      Unit (BSU) at the SPRC (Saunders        cleanliness when coming into care.
 associated with     care are predominantly in home-          et. al., 1998). These preliminary          • Additional costs in the HGS
       fostering.”   based or foster care. Indigenous         estimates of costs of children (not     budget were due to wear and tear
                     children are significantly over-         in care) were shown to 26 groups of     and damage to furniture, fittings,
                     represented in the child welfare         carers (Indigenous and non-             appliances, linen/towels, and soft
                     system and more specifically in out-     Indigenous) covering all States and     furnishings including excessive
                     of-home care. The rate of                Territories. In total 159 carers        wear on beds/bedding and
                     Indigenous children (aged 0-17           commented on the composition of         mattresses. Repairs and
                     years), in out-of-home care at 18.3      the preliminary budgets and             maintenance of electrical appliances
                     per 1000, is significantly higher        suggested areas of improvement to       and costs for phone and postage
                     than for non-Indigenous children at      better reflect costs specific to        usage were also higher than usual.
                     3.6 per 1000 (AIHW, 2001).               fostering. The emphatic response           • In the health area carers noted
                        The Child and Family Welfare          from the majority of carers to these    substantial costs for over-the-
                     Association of Australia (CAFWAA)        preliminary estimates was that they     counter medications and other
                     and the Association of Children’s        were not adequate to meet the           prescription drugs for foster
                     Welfare Agencies (ACWA)                  needs of children in care. Carers       children.
                     commissioned the SPRC to                 highlighted numerous areas where           • Carers incurred high transport
                     examine the adequacy and                 costs specific to fostering were not    costs. These costs were specific to
                     effectiveness of foster care             reflected. In summary they were as      the geographical location with
                     allowances in Australia. The aim of      follows.                                higher costs for rural and regional
                     the study was to contribute to an            • Significant costs were incurred   carers. Substantial costs were
                     assessment of current subsidy            in the housing budget for general       incurred when regular ‘access and
                     payments in meeting the costs of         ‘wear and tear’ and damage to           contact’ visits to children’s birth
                     children in care. The broad              household goods including               families occurred. The purchase
                     research objective was to establish a    furniture, furnishings, carpets,        and running costs of larger vehicles
                     set of budgets to cover the costs for    fittings, electrical equipment and      to accommodate sibling or larger
                     children of specific ages and sex in     white goods. Water usage was            groups of foster children plus a
                     foster care. The rationale               higher than usual due to additional     carer’s family were significant costs
                     underlining this objective was to        laundering and showering (higher        for some carers.
                     provide better information on the        incidence of bed-wetting children          • Carers noted the lack of an
                     direct costs to carers associated with   of all ages and those not toilet        allowance in the BSU leisure
                     fostering.                               trained).                                               Continued on page 12

 6x    No 81   x     MAY 2002
Reforming The Child
Protection System in China
by Xiaoyuan Shang
   About 50,000 orphaned or             missing from official population         first large-scale investigation of
abandoned children, most of them        registration in the past three           children in alternative care in eight
also disabled, are in the care of the   decades (Skinner and Yuan 1998).         Chinese provinces in 2001 found
state in China (Shang, 2001). The       At the same time, the first adoption     that the policy change since 1995
system of child protection in China     law applied in 1992 strictly             has achieved major success. In the
was established in the early 1950s      controlled domestic adoption.            eight research sites, the dominant
when the communist government           Because of this, large numbers of        form of alternative care has
came to office. Before economic         abandoned children could not be          changed from institutional care to
reforms, under the combined             adopted by families who wanted           family based care, such as adoption,
influence of Confucianism and           them, and had to be cared for by         foster care or residential group care.
communist ideology, the system of       state children’s welfare institutions.   Adoption is regarded as the best
child protection in China was           This challenged the existing             choice for arrangements for
characterized by two contrasting        system of child protection.              orphaned or abandoned children.
institutional features. The state       However, owing to the political          During 2000, about 11 per cent of
monopolized welfare provision to        voicelessness of conventional            children in the care of the state
orphaned and abandoned children         welfare beneficiaries and the lack       were adopted, 90 per cent of them
found in urban areas, which             of independent forces in Chinese         were healthy and about 10 per cent
overwhelmingly relied on                society could who voice their            had slight or medium handicaps.
institutional care. However, the        demand, the responsible                  Considering over 80 per cent of
government played only a minimal        government department, the               custodial children in these welfare
role in welfare provision for           Ministry of Civil Affairs (MCA), has     institutions were handicapped, this
children in families, leaving the       failed to persuade the central           result means almost all newly            “...the idea that
family to bear the main                 government to make additional            taken-in healthy abandoned
responsibilities of caring for          appropriations to meet this              children were permanently placed
                                                                                                                          foster care is a
                                        increased need (Shang, 2001). State
children. Neither social security nor
                                        investment has fallen behind what
                                                                                 with families. In addition, a total of   better way to
public health provision covered                                                  63.8 per cent of all custodial
children, who were seen as the sole
                                        is needed to maintain welfare            children were cared for in families      care for children,
                                        provision to orphaned or                 or family-like environments.
responsibility of the family. This                                                                                        as well as being
                                        abandoned children at an                 Institutional care is no longer the
system left orphaned or abandoned
                                        acceptable level. The situation of
children in rural areas and millions
                                        orphaned or abandoned children in
                                                                                 main form of alternative care in         more cost-
of children with disabilities outside                                            China. The final changes is that the
the protection of the state. Because
                                        China has raised serious human           living conditions of children in care    efficient was
                                        rights concern in international
of this, the number of children in                                               have been improved greatly as all        introduced into
                                        communities since 1995 (Human
the care of the state has been                                                   the institutions in the research sites
                                        Rights Watch/Asia, 1996).                                                         China.”
extremely small, between 4000 and                                                have experienced substantial
                                            The situation has changed
5000 nationwide during the 1970s                                                 renovation or rebuilding since 1995.
                                        recently. The government
and 1980s (Shang, 2001).                                                         Not only has physical care
                                        increased investment in state
   Child abandonment is a serious                                                improved, but also staff of state
                                        children’s welfare institutions, gave
social problem in China. Skinner                                                 children’s welfare institutions have
                                        up its state monopoly position, and
and Yuan (1998) found that the                                                   become aware of children’s
                                        accepted new policy directions that
number of female infanticides or                                                 psychological needs.
                                        allowed individual citizens and
abandonment in a single region                                                       Although the reform has
                                        non-government organizations to
(lower Yangtze region), was as high                                              achieved impressive progress, there
                                        play a greater role in welfare
as 800 000 from 1970 to 1980, and                                                is still a long way to go if all
                                        provision to children. During the
the disappearance of girls has                                                   vulnerable children are protected
                                        process, the idea that foster care is
continued at an increasing rate in                                               from abandonment and neglects.
                                        a better way to care for children, as
the 1980s and 1990s. Under the          well as being more cost-efficient        First, child abandonment is still a
combined influence of                   was introduced into China by             serious social problem in China and
government’s ‘one-child’ policy and     international NGOs and accepted          the number of abandoned children
new socio-economic circumstances        by some state children’s welfare         found in urban areas has not
appearing in the reform era, the        institutions at a local level as well    decreased dramatically. Preventive
number of abandoned children            as policy makers at the central          methods have not been widely
found in urban areas has increased      level. The adoption law has been         used. Second, the child protection
since the early 1990s (Johnson,         revised twice since 1992.                system in China only covers
Huang, and Wang, 1998). It was              What is the current situation of     orphaned or abandoned children.
estimated that millions of girls are    child protection in China? The                            Continued on page 12

                                                                                                              SPRC NEWSLETTER       x7
                   From the
                                                                                            characteristics, material conditions

                   Projects                                                                 and the barriers they face in local
                                                                                            labour markets. The agencies have
                                                                                            also recruited long-term
                                                                                            unemployed clients for the in-
                                                                                            depth interviews, according to a set
                 Long-term                             factors contributing to high levels
                                                                                            of specifications. The interviewees
                 Unemployment in of long-termin a period of
                                                                                            were selected to be broadly typical
                                                                                            of the long-term unemployed
                 NSW                                   employment growth. It is hoped
                                                                                            population in terms of sex, age and
                     The Australian labour market at that a better understanding of the     ethnicity, and to include people
                 the end of 2001 was in a relatively   dynamics of long-term
                                                                                            receiving different types of
                 healthy position. There had been      unemployment in a relatively
                                                                                            employment assistance, as well as
                 eight years of job growth, with       buoyant labour market might assist
                                                                                            those with circumstances known
                                                       the development of more effective
                 around 1.5 million extra jobs created                                      from the literature to be a factor in
                                                       and integrated policy responses.
                 since 1992-93. The unemployment                                            long-term unemployment.
                                                       The project was initiated by the
                 rate had reached its lowest since                                              Interviews topics have included
                                                       FaCS New South Wales State
                 1989 in September 2000, falling                                            participants’ own perceptions of the
                                                       Office and the focus is on NSW,
                 from 11.0 per cent to around 6.2 per                                       causes of their long-term
                                                       which in recent years has
                 cent. However, it then rose again,                                         unemployment, with exploration of
                                                       experienced a high level of
                 reaching 6.8 per cent in December                                          the issues raised. Typically, these
                                                       employment growth on average and
                 2001 and 7.4 per cent in January                                           conversations have ranged across
                                                       a more substantial reduction in
                 2002. It appears that since then                                           life trajectories; personal, family
                                                       overall unemployment than most
                 Australia has defied the world                                             and community contexts and
                                                       other parts of Australia.
                 economic downturn following the                                            relationships; culture and
                                                           The study involves four
                 events of September 11 and that
                                                       elements: a review of the literature migration; health and disability
                 unemployment has fallen again                                              issues; locational and housing
                                                       on long-term unemployment and
                 somewhat.                                                                  issues; experiences with education
                                                       its contributing factors; secondary
                     In spite of this economic success analysis of a range of data sets,    and training; employment histories
                 and the consequent job growth,        including the FaCS administrative    and experiences; job search
                 long-term unemployment, defined Longitudinal Data Set (LDS) and            experiences and attitudes to work.
                 as being out of work for one year or ABS industry and labour force data;       Analysis of both the statistical
                 more, has remained relatively high, interviews with providers of           and interview data is nearing
                 currently standing at just over one- employment assistance; and in-        completion and a draft report is
                 fifth of all official unemployment.   depth qualitative interviews with    expected to be submitted in late
                 The level of very long-term           27 long-term unemployed people.      April. The SPRC staff involved are
                 unemployment (unemployed for              The empirical research has       Tony Eardley, Jenny Chalmers and
                 two years or more) also remains       focused specifically on Western      David Abelló.
                 stubbornly high and nearly two-       Sydney, with agencies and long-
                 thirds of all those receiving         term unemployed people drawn         EVALUATION OF THE
                 unemployment allowances have          from South Western, Outer Western
                 been receiving them for more than and Central Western Sydney. This NEW SOUTH WALES
                 a year. The tendency for long-term part of Sydney includes areas of        MENTAL HEALTH
                 unemployment to rise substantially high and low unemployment as            INTEGRATION
                 during recessions and then to fall    well as areas of employment growth PROJECTS
                 more slowly than overall              and decline. A focus on sites allows
                 unemployment is a well-known          examination of the dynamics of the       In May last year, the SPRC was
                 contemporary feature of               interactions between long-term       invited to submit an expression of
                 industrialised economies. Also,       unemployed people and their          interest in the evaluation of the
                 more than three-quarters of new       communities, service providers and NSW Mental Health Integration
                 jobs created since the mid-1990s      local labour markets.                Projects (MHIPs). These
                 have been either part-time, casual        The nine participating agencies  demonstration projects aim to
                 or of non-employee status.            are mainly providers of Intensive    facilitate closer working
                     This research project is being    Assistance within the Job Network, relationships between public and
                 undertaken in partnership with the the Community Support Program           private providers of mental
                 Commonwealth Department of            and Work for the Dole. Managers      services, integration of services at
                 Family and Community Services         or senior caseworkers in each agency different levels of the system (from
                 under the Social Policy Research      have been interviewed about their    individual case to intersectoral
                 Services Agreement. The aim is to perceptions and experiences of           working) and better outcomes for
                 increase our understanding of the     long-term unemployed people's        mental health consumers. They

8x   No 81   x   MAY 2002
involve fund pooling and use of the      Services, an ARC project on the             • The nature and impact of
national standardised mental health      development and validation of           informal support for older people;
outcome measures.                        outcomes measures by consumers,         and
    The SPRC was chosen to               and a MHS accreditation process;            • Changing attitudes to social
develop an evaluation plan in            and second, to draw together            support for older people.
consultation with the two local          quantitative and qualitative data           These four issues will be
projects in Illawarra and the Far        relating to different levels in the     examined using for the first time
West (based in Broken Hill) and          mental health system and beyond,        outside of China, data from the
their stakeholders. The Evaluation       to demonstrate effects on               2000 national survey that examined
plan was presented in outline to the     integration and outcomes for            the implications of population
MHIP National Evaluation                 consumers and providers.                ageing on the support systems for
Steering Group at the end of                Dr Natasha Posner, the project       older people in rural and urban
November and submitted in detail         coordinator, Justin McNab and Jan       areas. Much of the data gathered
to the Commonwealth Department           Webster who was employed by the         during this survey replicated that
of Health and Ageing, Mental             Centre as a consultant in relation to   collected eight years earlier in 1992
Health and Special Programs              the Far West MHS began work on          and a major focus of interest is on
Branch in early January 2002.            the project September 2001. David       how the circumstances and
    In February 2002, the SPRC was       Abelló has joined the team to assist    conditions of older people have
contracted to conduct the                in the evaluation of the Illawarra      changed in a period of rapid
evaluation of the Illawarra project      MHIPS.                                  economic reform and welfare
until its conclusion in June 2003.          The project in the Far West had      system development.
The Illawarra MHIP is an umbrella        a delayed start when the initiating         Both surveys were conducted by
for 13 smaller projects involving        project officer left, but has recently  the China Research Centre on
developments in the work of              appointed a new project officer. If     Ageing (CRCA), which is located in
clinical psychologists, public and       the evaluation goes ahead, it will be   Beijing’s Chaoyang District. The
private sector psychiatrists, GPs,       conducted in association with           CRCA has agreed to participate in
NGOs and consumers in the                Professor David Lyle, University of     this research, providing the basis
provision of mental health services      Sydney, in Broken Hill.                 for bringing together the SPRC’s
and support. Share-care and                                                      expertise in analytical techniques
consultation-liaison arrangements        The Role and                            and knowledge of policy issues
between GPs and psychiatrists are                                                with the on-the-ground practical
in place; the Specialist                 Impact of the                           knowledge of researchers at CRCA.
Psychological Service provides           Social Support                          It is currently envisaged that the
anxiety disorder and borderline                                                  bulk of the data analysis will be
personality disorder clinics; Lifeline
                                         System on the
                                                                                 undertaken by CRCA researchers
(Southcoast) telephone counsellors       Well-Being of the located at SPRC, thus providing
are provided with supervision by a       Elderly in China                        the maximum scope for intellectual
psychiatrist and an interagency                                                  interaction whilst at the same time
agreement has been developed for            This project, funded by a three- providing a vehicle for CRCA
the coordinated care of frequent         year Australian Research Council        researchers to upgrade their
callers who have other mental            Discovery Grant is still in its early   analytical skills.
health care providers; consumers         stages, setting up the process              Although the main focus of the
are being employed as                    whereby data from two recent            research will be on how things have
rehabilitation consultants and there     surveys of older people in China        changed in China during its recent
is a volunteer support program.          can be analysed. The SPRC’s role        rapid transition to a more open and
    The challenge for the Illawarra      in the research will involve detailed integrated economy, attention will
MHIP is to keep all these                examination of data from two            also be paid to a series of
developments (and there are              national surveys undertaken in          comparisons between older people
others), working together in the         1992 and 2000 that collected a          in China and in Australia. The two
same direction; and if they are          massive amount of information on        countries differ enormously in size
effective, to find ways to sustain       the living conditions, lifestyles and – the older population in China in
them at the end of the project. The      attitudes of older people in rural      2000 was over 120 million, more
challenge for the evaluation in          and urban areas of China. Four          than six times the size of the total
assessing the effects of the MHIP        specific issues will be investigated: Australian population – as well as in
is, first to take account of the other      • The extent of poverty and          their stage of development, but
significant developments in the          income inequality among the older there are nonetheless many areas
Mental Health Service (MHS) in           population;                             where each can learn from the
Illawarra which include a strategic         • The coverage, accessibility and research and experience of the
planning process being guided by         affordability of health care facilities other. We in Australia are gradually
the new Director of Mental Health        and services;                           realizing that the formal welfare

                                                                                                             SPRC NEWSLETTER   x9
                   system rests on a huge sub-              difficulties in finding jobs have        have overcome barriers associated
                   structure of informal social support,    been produced by international           with their age
                   without which it could not survive.      bodies including the World Bank,            • To identify and develop
                   China has a far less developed           OECD, ILO, the UN, and the               pathways and factors contributing
                   formal system but its informal           European Union. In Australia             to successful employment
                   system remains strong and provides       alone, there have been at least six      outcomes for older workers
                   many lessons from which we can           official reports since 1999, as well        • To provide information to
                   learn. Progress with the research        as a steady flow of academic studies     assist service providers in
                   will be reported in later issues of      and reports by NGOs. The topic           facilitating access to the labour
                   the SPRC Newsletter, as the              has also been dealt with in several      market for older workers
                   results of what promises to be an        SPRC studies.                               • To improve the success rate of
                   exciting piece of research begin to          The bulk of this literature          the Job Network and Mature Age
                   emerge. SPRC researchers in the          concerns the problems and                Workers Programs in assisting
                   project are Peter Saunders and           obstacles faced by mature-age            unemployed mature-age workers.
                   Xiaoyuan Shang.                          workers, but there has been very            Three Job Network providers –
                                                            little inquiry into factors related to   Mission Employment, Salvation
                                                            success, rather than failure, in the     Army Employment Plus, and Work
                   Best Practice in                         labour market. In 2001, Sol Encel        Ventures Inc – assisted by
                   Mature Age                               and Helen Studencki received a           providing addresses of clients aged
                   Employment                               grant from the Regional Assistance       45 and over, to be reached through
                   Services                                 program (then administered by the        a mail questionnaire. A small
                                                            Department of Employment,                number of follow-up interviews
                      The special problems faced by         Workplace relations and Small            were conducted with respondents
                   older workers in the labour market       Business, and now with the new           who had indicated their willingness
                   have attracted increasing attention      Department of Transport and              to be interviewed.
                   in a number of countries in the last     Regional Services). The grant was           A draft report was presented to a
                   10-15 years Reports on the               top identify ‘Best Practice in           forum of interested parties on
                   disproportionately high rates of         Mature Age Employment Services’,         March 12, and feedback from this
                   unemployment among mature-age            and its objectives set out as follows.   forum will be incorporated in the
                   workers (generally defined as aged           • To identify and track the          final report.
                   45 years and over), and their            progress of mature age workers who

                   From the Director                                                                                          from page 3

                   crucial impact on the size of the e/r    younger workers) have had                two eminent American experts in
                   ratio and if demographic pressures       precisely the opposite effect.           the field – Professors Gary Burtless
                   are causing the ratio to rise, then an       These second generation studies      from the Brookings Institution and
                   obvious response is to try to offset     of ageing have also opened up new        Timothy Smeeding from Syracuse
                   this through policies that cause it to   issues for research, including why it    University. Their accounts of how
                   fall.                                    is that older workers have been          the debate has evolved in the US
                      Policies that keep workers in the     retiring from the labour force and       was accompanied by two papers –
                   employed labour force for longer, or     what role the attitudes of employers     from Julia Perry and Michael
                   allow those who have retired to          play in this process. More generally,    Bittman – reporting recent SPRC
                   maintain a part-time attachment to       they have focused attention on the       research on early retirement and
                   the world of (paid) work thus have       role of the labour market and what       employer attitudes to older
                   a key role to play in the response to    needs to be done to maintain             workers. The papers (available
                   ageing. Again, however, some of          people’s involvement in it for as        from the SPRC website at
                   the policies introduced in response      long as possible, given their own point the
                   to the alarmist ‘first generation’       capabilities and aspirations.            way to an emerging perspective on
                   studies (e.g. increasing the pension         These issues were explored at a      ageing that promises a better
                   income-test or encouraging older         seminar sponsored by the SPRC at         understanding of the issues and
                   workers to ‘exit gracefully’ from the    the beginning of April, at which we      offers the prospect of an effective
                   labour force to make way for             were fortunate to hear the views of      policy response.

10 x   No 81   x     MAY 2002
              ‘Ageing Societies:
         to the Policy Challenges’
               Seminar Papers
       In April the SPRC ran a seminar with leading researchers in the field of ageing from both
     the United States and Australia. Three papers presented at the seminar are now available
             for free download from the SPRC Website:

                   ‘Does Population Ageing Represent a Crisis for Rich Societies?’
                   Professor Gary Burtless, Brookings Institution, Washington DC

   ‘The Future Costs of Health Care in Ageing Societies: Is the Glass Half Full or Half Empty?’
     Tim Smeeding, Maxwell Professor of Public Policy, Syracuse University, USA, Director of
                 the Luxembourg Income Study and Visiting Professor, SPRC

      ‘Older Workers: A Survey of Recent Recruitment Decisions in a High Growth Industry’
                        Michael Bittman, Senior Research Fellow, SPRC

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                                                                                                    SPRC NEWSLETTER        x 11
                       the Mean!                      Continued from page 5

                         Smeeding, T., Rainwater, L. and       Poverty. Russell Sage Foundation,          A Response to The Smith Family
                       Burtless, G. (2002), ‘United States     New York and Harvard University            Report on Poverty in Australia’,
                       Poverty in a Cross-National             Press, Cambridge, MA, 162-189.             Issue Analysis,
                       Context’, in S.H. Danziger, and            Tsumori, K., Saunders, P. and
                       R.H. Haveman, eds., Understanding       Hughes, H. (2002), ‘Poor Arguments.

                       Costs of Foster Care Continued
                       – A National Study from page 6
                       estimates for pocket money and          the difference on average between          in all age groups would be required
                       gifts (birthdays and Christmas).        the costs for foster children and the      if carers were to receive amounts
                       Extra film (and developing) for         BSU estimates was around 52                closer to the ‘real’ costs of fostering.
                       photos for birth families and life      percent. These findings are                The report will be available in June
                       storybooks was also expensive.          comparable with Oldfield’s results         from the following websites:
    “...few States         • In the area of personal care      where the extra costs of fostering in and
                       the use of disposables to               the UK represented an overall    
     appeared to       accommodate wetting and soiling         average of 56 per cent (Oldfield,          References
reimburse carers       beyond the age when children were       1997:130).                                    Australian Institute of Health
                       usually toilet-trained resulted in         A comparison of the levels of           and Welfare (AIHW) (2001), Child
    at rates that      significant costs to many carers.       standard subsidy payments made             Protection Australia, 1999-00, Child
                       Carers also noted waste and             by the States (Bray, 2001) to the          Welfare Series, No 27, AIHW,
    approximate        overuse of toiletries by children of    estimated levels of children in care       Canberra.
   the estimated       all ages.                               in similar age groups was                     Bray, J. (2001), Comparative
                           Work by Oldfield, which             undertaken. The findings                   Analysis of Careprovider Payments
    cost of foster     examined the extra costs of             indicated that few States appeared         Across Australia and New Zealand,
          children.”   fostering and the adequacy of foster    to reimburse carers at rates that          (unpublished),
                       care allowances in the UK, proved a     approximate the estimated cost of
                       useful tool in assisting the            foster children. The findings from            Oldfield, N. (1997), The Adequacy
                       development of foster care costs in     this research suggest that a               of Foster Care Allowances, Ashgate,
                       Australia. After modifying the BSU      significant increase in the levels of      Aldershot, UK.
                       estimates the figures indicated that    subsidy payments paid for children

                       Reforming the child protection
                       system in China Continued from page 7
                       This system leaves millions of          effectively. A part of this effort is to      Johnson, K. Huang, B. and Wang,
                       vulnerable children, including          reform the existing state children’s       L. (1998), ‘Infant abandonment and
                       children with disabilities, children    welfare institutions and to change         adoption in China’, Population and
                       maltreated in families and children     them from old style orphanages, to         Development Review, 24(3), 469-510.
“The new policy        in poor or single parent families       new multi-functional child welfare            McGowan, B. G and Walsh E.
   development         outside its protection. Third,          centres, which will provide services       M. (2000), ‘Policy Challenges for
                       although almost all healthy             to vulnerable children in Chinese          Child Welfare in the New
emphasises the         abandoned children are adopted          society. The new policy                    Century’, Child Welfare, Jan/Feb.
                       before they reach three years old, it                                                 Shang, Xiaoyuan (2001), ‘Moving
      function of      is very difficult to find adoptive
                                                               development emphasises the
                                                                                                          toward a Multi-level and Multi-
                                                               function of family, community
           family,     families for children with              services and preventive intervention       pillar System: Institutional Care in
                       disabilities. Children with                                                        Two Chinese Cities’, Journal of
     community         disabilities account for 90 per cent
                                                               to families with vulnerable
                                                                                                          Social Policy, 30(2), April, 259-81.
                                                               children. This policy change
    services and       of abandoned children.                                                                Skinner, G. William, and Yuan,
                                                               parallels policy trends in Australia,
                       Consequently they have to be                                                       Jianhua (1998), ‘A Spatial
       preventive                                              and many other Western countries
                       cared for by the state. Some are                                                   Differentiation in Reproductive
                                                               (McGowan, and Walsh, 2000).                Behaviour in the Lower Yangzi
   intervention.”      institutionalised for very long time.
                       This situation is increasingly          References                                 Macro Region of China, 1966-
                       unacceptable. Both the Chinese             Human Rights Watch/Asia                 1990’, Paper resented at the Social
                       government and Chinese society          (1996), Death By Default - A Policy of     Science History Association, Chicago,
                       are looking for new methods to          Fatal Neglect in China's State             21 November.
                       protect vulnerable children more        Orphanages, Press Release, 7 January.

  12 x    No 81   x      MAY 2002

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