Available research and program studies were reviewed to determine the following: the current state of adult literacy programs serving welfare recipients, educational strategies that have proved successful in training and placing welfare recipients and moving them into the job market, and ways of restructuring education programs to improve the success of welfare reform. Among the main findings of the review were the following: (1) half of all welfare recipients present challenges (such as unrecognized learning disabilities and personal/family problems) that cannot be overcome through typical short-term interventions; (2) traditional adult literacy programs have had difficulty attracting, retaining, and producing substantial and long-lasting gains for welfare recipients; and (3) those adult literacy programs that have been successful in helping welfare recipients have integrated basic skills instruction with occupational training and have been tailored to participants' specific needs and challenges. It was concluded that the education/retraining components of federal/state welfare reform proposals should make allowance for the diversity of the welfare population and that adult literacy and skills training programs should address noneducational barriers to employability such as low self-esteem, unstable housing, and severe family problems, and integrate adult literacy instruction with the education of adult learners' children. (MN)