With a national goal announced as "ending welfare as we know it," it is necessary to discuss questions regarding targeting, sanctions and incentives, service delivery, and success criteria for adult literacy programs that attempt to train low-literate adults for jobs. At present, there are about 14-15 million recipients of Aid to Families with Dependent Children (AFDC), two-thirds of them being children. Total expenditures for benefits in 1992 were more than $22 billion. More than half of the 4.6 million parents on AFDC are under 30 years old, with 8 percent under 20 years old. Approximately two-thirds of welfare recipients collect assistance for less than 2 years at a time, using it as a transition through hard times. As a group, welfare recipients have significantly lower educational attainment and achievement than the general adult population, with nearly half having less than a high school diploma; 40 percent of welfare recipients in a national survey of adult education programs possessed skills below the high school entry level. Approximately 70 percent of welfare recipients are concentrated in the two lowest literacy levels. Like other adult literacy students, AFDC recipients who enroll in adult literacy classes often have negative prior school experiences, learning disabilities, low self-esteem, and little confidence in their capacity to learn. In order to formulate policies to reform welfare, answers to the following questions must be sought: What should the goals of adult literacy and basic skills programs for welfare recipients be? What performance standards should be developed for the literacy and basic skills components of welfare-to-work programs? What is known about successful strategies for welfare-to-work programs? How should resources be targeted? and What are the policy and legislative implications of these recommendations? (Contains 14 references.) (KC)