Parliamentarians voted on Friday to implement the measure which has been a source of contention between the coalition of the Christian Democrats (CDU) and Free Democrats (FDP) and members of the opposition.
The measure takes effect on August 1, 2013 and will provides 100 euros ($128) per month for parents who keep their kids at home rather than sending them to a public daycare. Starting in August 2014, that amount will go up to 150 euros.
Parents with kids aged one to three born after July 31 of this year are eligible to apply for the child-care stipend.
Lack of complete coalition support
Friday's vote passed with 310 votes in favor, 282 votes against and two abstentions. There were many dissenting voices in the FDP during the run-up to the vote and some coalition parliamentarians voted against the measure.
Dorothee Bär of the Christian Socialists Union (CSU), the CDU's Bavarian sister party, said the bill advanced "the freedom of parents to make a choice regarding the care of young children."
Opposition parties were vocal in their disapproval in the debate that preceded Friday's decision. In parliament on Friday, the Social Democrat's (SPD) 2013 chancellor candidate, Peer Steinbrück, called the measure "foolish" and said it was a step backwards for society.
Jürgen Trittin, co-chair of the parliamentary fraction of the Green party, said the measure was a political attempt by the government to drum up election-year support for the CSU, which heavily backed the law.
"We're all going to pay for this expensive folly," Trittin said on Friday, adding that the child-care stipend was "against children, women, families, and the economy."
One of the general criticisms of the stipend is that it will encourage women to stay out of the workplace for longer after having a child and that it keeps young kids away from the educational opportunities offered by public daycare.
German daycares are beyond capacity, and some believe the child-care stipend is merely a consolation for parents who might not have the means to get their kids a daycare spot. The government is aiming to increase capacity by August 2013, when another law guaranteeing parents a daycare spot for their kids comes into effect.
mz/hc (dapd, dpa, KNA)