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jimrandomh comments on Singularity the hard way - Less Wrong
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According to the CIA world factbook, the world literacy rate is 83.7%, so increasing this to 100% is only a 20% increase in the number of literate people. That's equivalent to about 18 years of population growth at the current rate of 1.1%/yr. World literacy is a good and desirable thing, but we already got most of the way there (and collected the benefits) in the 20th century; the remaining benefits are humanitarian, not technological.
I think the breakpoint is access to computers, not literacy.
There's another effect as well. Humans compete with each other; at the moment, all literate people can claim a legitimate advantage over the illiterate people (and, in the case of some, this may be an excuse to stop self-improving). Once there are no illiterates, that excuse falls away.
Most potential scientists don't view illiterate children in Third World countries as their competitors.