Recent fears that the nation's high schools turn out "thousands, even millions" of graduates who cannot read well enough to cope with such everyday items as insurance policies and application blanks are not supported by facts, a University of Michigan researcher has concluded.

The issue is big in educational circles. An official of the National Institute of Education, Thomas G. Sticht, said fears of functionally illiterate graduates have prompted more than half the states to consider laws requiring schools to teach a minimum level of reading competency.

In a study paid for by NIE but not yet made public, graduate student Donald L. Fisher concludes schools do give effective reading instruction to most students.

Those who are functionally illiterate, he concludes, are ". . . a small but clearly indentifiable population: Those students who have failed to be promoted along with their age group."

"While the evidence that high school graduates are often functionally illiterate seems a bit thin," Fisher concludes, "the evidence that students who fail to graduate from high school constitute the bulk of the illiterates is much stronger. This is as true today as it was 50 years ago."

Fisher reached his conclusions after examining six research surveys taken the first half of this decade, which concluded that anywhere from 2 to 13 percent of adults with a 12th grade education were functionally illiterate.

Sticht said Fisher's study is ". . . the most important analysis of those (surveys) that's been done up to date." Fisher began his analysis in 1975 as an intern at NIE, Sticht said.

According to Fisher's study, one of the surveys he examined, done in 1970, concluded that "more than 50 million adults are functionally illiterate." A 1970 survey by pollster Louis Harris "identified 18 million adults as having less-than-adequate reading skills."

In 1973, an Educational Testing Service study reported that "significant numbers of adults could not understand items like those encountered in a fairly regular basis . . . Train and bus schedules and directions for using household products proved especially difficult."

The problem was examined in a different way by a 1975 test of 17-year-olds still in school, Fisher reported. It found that:

"When given an automobile insurance policy, 83 percent of the sample were unable to determine correctly the maximum amount that the policy would pay if the driver injured another person . . ."

"When given an application blank with instructions for enrolling in a book club, 56 percent of the sample were unable to determine correctly the amount of money the applicant should send with the order for the books.

"When given a replica of a traffic ticket, 54 percent of the sample could not determine correctly the last day on which the fine could be paid."

In his analysis, Fisher argues the surveys misapply the term "functional literacy," and that errors or "fatigue on the part of the test taker" inflate the number of illiterates.

He notes that all the surveys classified between 5 and 14 percent of the professional-managerial population as functionally illiterate.

"Surely one would want to conclude that the functional literacy label had been applied inappropriately to individuals in the professional-managerial class," he writes.

"Even if a significant proportion of this class in fact have difficulty reading, this problem has not held them back as indicated by their occupations. Their illiteracy does not hinder their functioning. Hence the label is misapplied."

Fisher also assumed that a similar or greater labeling error took place in all other occupational categories the surveys covered.

Once new percentages are worked out, taking mislabeling into account, ". . . we might well conclude that high school illiterates, almost to a person, are all mislabeled," he said.