Standards are relative to a time and place. You have proposed a potential standard here: reading at the expected level of a modern 6th grader. (I'm not going to get into the ambiguity of 21% being "functionally" illiterate vs. literally illiterate here.)
Compared to centuries past, when many couldn't read at all, a median level of 6th grade is much better. Compared to centuries in the future, it is, hopefully, worse. It sounds bad because education in America is free up to 12th grade and compulsory up to 10th grade. But that's only if your expectation is an educational system running at 100% efficiency. No matter what system of education you have, some people will not absorb all of the information being presented to them at the same rate.
Student A might attend school until the age of 16 and be advanced in math but behind in English. She might take until the age of 16 to do what some of her peers are doing at 11 and a few were doing at 7. Or she may have hit a personal limit at 11 and been wasting her time struggling along in English class since then. I hope our education system continues to improve at helping people like Student A. But I don't think it's appropriate to discount the intrinsic value of Student A or her intelligence, simply because she has a smaller vocabulary.
If what you've said is true, many jobs in our society are being done by people who have limited reading ability. But somehow we get along anyway. Welders weld, fire fighters put out fires, and accountants keep books. I do my job, and you do yours. I don't see why you have to act so superior about it.
P.S. Do sixth graders know how to correctly punctuate their sentences with commas? Maybe you were absent that day.
