The way that most psychologists finesse this is by assuming that people can accurately report their psychological states. In empathy studies with children, researchers show them a scenario and ask them what the person in the scenario is feeling or experiencing. If the child provides a meaningful report ("someone said something mean to her, so she's sad"), then most psychologists will say the child has empathy.
[WS:] So what makes you think that animals are incapable of experiencing emotional states similar to those reported by children? You seem to fall into the fallacy of interpreting the absence of evidence as the evidence of absence.
Consider the following:
http://www.avam.org/exhibitions/home.html
"CHIMPS, BONOBOS & US
We humans share 98% of our DNA with chimpanzees and bonobos. It turns out, chimps and bonobos are even more closely related to humans than they are to gorillas. Christian Bernard, M.D., the great pioneer in human-to-human heart transplant, had an encounter with lab-housed chimpanzees that was to forever change his life:
I had bought two male chimps from a primate colony in Holland. They lived next to each other in separate cages for several months before I used one as a [heart] donor. When we put him to sleep in his cage in preparation for the operation, he chattered and cried incessantly. We attached no significance to this, but it must have made a great impression on his companion, for when we removed the body to the operating room, the other chimp wept bitterly and was inconsolable for days. The incident made a deep impression on me. I vowed never again to experiment with such sensitive creatures. "
Wojtek