To answer your actual question: functional illiteracy is still functional, if somebody has a job, and they're keeping it, doesn't matter if they can't really read. Most people can cope without doing any reading in their daily lives, they'll ask somebody else to read something for them if it's absolutely necessary, but there's a huge part of humanity whose jobs do not involve ingesting novel data and critical thinking.

Quite honestly even the people who do need those critical thinking skills don't need them on a day-to-day basis. Most people get into a routine and don't really need to read anymore. So somebody could adapt to that routine through friends and family, and never really learn how to read.

Now to move on to your scenario, which isn't based on a literacy, just on somebody being oblivious and or stubborn. Those people existed all levels. Just let him be. Don't let them annoy you. Arguing with an oblivious stubborn person is a double whammy, because they don't realize whatever they're doing is inefficient, and if they do eventually get it, they're going to double down because their stubborn