I don't agree that standards of literacy have fallen.
It's impossible to compare. Levels of literacy, in the sense of "not being illiterate" have risen massively, whatever the Tories try to argue.
The rise of social media and other formats however means that instead of only seeing the writing of university-educated professionals (newspapers, books, government pamphlets) we now see the writing of a whole swathe of society who, previously, would only have have written letters and postcards to their friends and filled out forms, the latter often with help. The bubz/hubz/lol people are evidence of rising literacy, or at least of rising useful literacy, because they are writing for a public audience, something their mothers would never have done.
Similarly, people who a generation ago would have been working in factories are now working in what were historic white collar occupations, where again they are expected to be able to write. Is their literacy as good as people in those jobs a generation ago? Perhaps not (and the free and easy 1970s/80s attitude to teaching grammar doesn't help). But there's a hell of a lot more of them, and the average level of literacy over that number of people is massively better.
So it looks like literacy is falling, because we see a wider range of literacy. But literacy overall is rising, because more and more people are using language effectively.
The idea in the 1970s that you didn't need to teach grammar because children acquire it anyway was a middle class fantasy, because it assumed the use of correct/standard/whatever English at home. It's now acting as a rather nasty inter-generational shibboleth, because people raised by educated parents in the 70s and 80s (ie, "us") have accurate English, while the main route to that knowledge, schools, denied it to many people who now feel diminished. In my darker moments I do wonder why NT adults who learnt to drive as adults can't learn grammar as adults on the same basis rather than blaming their schools, but it's actually much more complex than that and language acquisition as an adult is difficult.
But arguments that start from a position of "it was better in the past" are almost certainly wrong. You just saw a much smaller proportion of the produced language.