I have some serious doubt about the state of "literacy" of many young people in general. If it is as low as I fear, it is due to the prevelance of TV vs reading, and the watering down of school courses to fit the masses. Back in the day [a phrase I hate] we had a few TV stations, so at a certain time of day, we watched news or nothing. I think more people were exposed to the news. These day, many young people can go through life with their MP3 players or niche TV stations and never know that anything happened even down the block.
Have you ever watched Jay Leno's segments called Jay Walking? Sometimes he even interviews teachers who don't know the answers to simple questions. It is so painful for me to see this that I usually turn it off. Ignorance isn't funny.
Stephen Prothero has written an article entitled Worshiping in Ignorance. Worth the read.