Data from the 1992 National Adult Literacy Survey were analyzed in a study of the relationship between literacy skill levels and dependency on welfare. The study focused on the following: literacy levels in the welfare population and in different demographic groups, the relationship between educational attainment and literacy and labor force experience and literacy, and the effectiveness of selected strategies for raising literacy levels. Among the major findings were the following: (1) on a 5-point scale, from over a third to almost a half of all welfare recipients perform at the lowest literacy level and approximately one-third perform at the second lowest level; (2) the average literacy level of welfare recipients is below that of unskilled laborers and assemblers; (3) sex differences in average document and quantitative proficiency found in general population are reduced or eliminated in welfare populations; (4) the performance gap between Whites and Blacks and between Whites and Hispanics is smaller within welfare populations than within the national population; (5) as in the general population, employed welfare recipients with higher literacy levels earn higher wages than their less literate counterparts; and (6) controlled research studies have demonstrated that education and training can help raise welfare recipients' literacy levels. (Sixty-four tables/figures are included.) (MN)