Problem for job seeker not from College X, problem for employer or problem for society? So long that #3 is not exclusive and its just used as one of indicators

Problem for job seeker not from College X, problem for employer or problem for society? So long that #3 is not exclusive and its just used as one of indicators (think spam filtering), I don't see an issue for anybody. Using #3 exclusively happens, most of the times is seriously sub-optimal, and free market usually fixes it. If you do detect this kind of market inefficiency, there is an obvious way to arbitrage it -- startup started by and hiring people that market does not properly value. PS It is possible that employer is legally restricted from using Trait Y for selection, and is just using College X as a proxy. I don't condone doing that.