In my experience, as a general observer of the world around me, and as someone who teaches some really simple basics in python to non-IT students, it does seem to me that general computer literacy (of those that use/have to use computers*) declined, compared to back in the day™.
When we had fight with flimsy Windows98 (or geek it out in unwelcoming linux, but that never was a mainstream thing) even for normal tasks, you had to have some basic understanding of what you're doing (or you got punished with crashes and viruses) and computers were seen as practical, but complicated machines.
Nowadays, way more people use computers everyday (and I'd theoretically put smartphones into that category), but everything is easy and appified and marketing makes you believe those things work with unicorn farts and magic. Everything even remotely technical gets hidden from users, there's dozens of mechanisms protecting you from all kinds of stuff and phones generally are a black box that you're supposed to just consume on.
So from my experience, most people are overwhelmed by even the most simple things, like working in a folder structure or the realization that you can use a keyboard to make the computer do things or that error messages can contain more than just "Oops, something happened" and that you should please read them before shouting for the teacher that "It just doesn't work!"
Now am I just having nostalgia or is my observation valid?
I would suppose there should be some literature on this subject, but this is totally out of my field, and google scholar doesn't bring up anything useful when looking for
"computer literacy" smartphones. So I guess I'm mostly looking for objective literature on this subject.
And don't get me wrong, I don't want to go back to the time where computers where only mastered by the most 1337 wizards and win98 would surprise you everyday with a new fuckup. I love it that I have the power of all my trashed computers in my pocket and that I can simplify things that once used to be hard. And I'm aware that this simplification opened up a whole new world for a lot of people, but I feel like there's also some negatives associated with it, and I'd like to see what I can do to counter those.
*There is probably a whole different discussion to be had on the issue that many, many more people now are using computers (in the traditional PC/Laptop Form, but mostly, smartphones), so that the general "amount" of computer literacy in the population probably went up, see the answer by @Kevin Workman, but for this, I'm focused on the literacy of the users, not of users and non-users combined.