Australia

There are a couple of issues here I think, assuming one accepts the basic claim..

The cause of the present situation and whether this is necessarily a bad thing for our society.

The cause; in part I suspect the IT revolution, which took off for ordinary people from the early 2000's. A few years ago, I made the flippant observation that mobile phones and some social networks were producing a generation of illiterates. Today I'm no longer sure that's completely wrong, at least as part reason.

In recent years, I keep hearing the complaint that today's young adults can't read an analogue clock and cannot read or write cursive script. That's true of some 30 year olds I know.

Is this a bad thing? People learn what they need to learn to function. It seems to be a fallacy that illiterate/functionally illiterate people can't function in our society. That depends on the tasks they need to do domestically and to earn a living. My observation is that these days [and earlier] people were often trained by their employers.

Perhaps the need for universal literacy began with the Industrial revolution and the emergence of a large middle class. Perhaps the hoi poloi were eventually taught a basic level of literacy because their work required them to be able to read at a basic level. Learning to keep time became essential for even unskilled labour.

So, what happens to the functionally illiterate today? In many Western countries, economies have moved away from secondary industry into service industries.

Now I'm aware these ideas are a bit simplistic. It isn't my intention to prove a point, but only to question the assumption.