How early are children aware of (and endorse) group-based inequality in their society? We examine this question with 4-9-year-olds (N=345) in the context of Jewish (majority) and Arab-Palestinian (minority) relations in Israel, a context rife with institutional discrimination. Among adults, awareness of social hierarchy has different consequences for high-power and low-power group members. As such it is important to examine how early children become aware of power disparities in their society in relation to their group power. We developed a new measure to gauge children's expectation for discrimination based on ethnic identity in the allocation of State-funded resources. Specifically, we presented children with a joint pictorial representation of two towns - one in which everyone speaks Hebrew and one in which everyone speaks Arabic. Children were then asked to locate where in between the two towns they expected the Government to build different public structures (a playground, a mall, a hospital). The structures were presented one at a time and described as desired and valuable for both towns. Next, we asked the children to indicate where they themselves would build each of these structures if they had the power to decide. We found that Jewish-Israeli and Arab-Israeli children differed in their expectations but not their preferences for inequality. When asked for their own preferences, children from both groups similarly located the public structures closer to their own ingroup's town. However, considering children's expectations and preferences for inequality in unison yielded a strong difference between the two groups. Whereas Jewish children demonstrated a match between their own preferences and what they expected the government would do, Arab children demonstrated a gap between the two. We discuss potential sources and consequences for these findings as they relate to the perpetuation of hierarchy between groups in society.