I generally agree with your framing, I'll just comment on a minor detail about what "literate" means. Typically, people are classed in three categories of literacy, not two: illiterate means you essentially can't read at all, literate means you can read and understand text to some level, but then there are people who are functionally illiterate - people who can read the letters and sound out text, but can't actively comprehend what they're reading to a level that allows them to function normally in society - say, being able to read and comprehend an email they receive at work or a news article. This difference between literate and functionally illiterate may have been what the poster above was referring to.

Note that functional illiteracy is not some niche phenomenon, it's a huge problem in many school systems. In my own country (Romania), while the rate of illiteracy is something like <1% of the populace, the rate of functional illiteracy is estimated to be as high as 45% of those finishing school.