With welfare reform now a reality, policy makers and employers must grapple with the employment impediments that keep much of the welfare population out of the work force. The foremost problem is illiteracy. One-third of welfare recipients are functionally illiterate; another third possesses only marginally better reading skills, still unable to perform many basic job-related tasks. Entry-level jobs represent their only employment opportunities. Lacking formal education and real work experience, they cannot expect middle management jobs or salaries based on need rather than qualifications. With welfare reform, many are proposing higher mandated wages or so-called "living wages" of up to $9 per hour or more. These proposals ignore the basic tenet of the employment process: employees are hired based on their skills, not their needs. Despite overwhelming evidence of the effects of literacy and work experience on wages and massive spending on primary, secondary, and remedial education, literacy rates continue to decline. The contradiction between the ideals of welfare reform and the realities of high minimum wages should force policymakers to address certain questions: what will be the long-term effects of mandating wages that illiterate people will never command. How can welfare recipients find work if wages that equate to their skill levels are outlawed? And how can untrained and illiterate individuals gain on-the-job experience if they are priced out of the entry-level job market? (Appendixes include definitions and 42 endnotes.) (YLB)