It's not really exaggerated and it's probably worse now. This is why it took so long for iPhones to even support the concept of a file manager; most people just do not get it no matter how much you explain it. I have three kids in school, from grade school to high school, and the concept of files is just... not a thing? Basically everything is in Google Docs or through some web communication type of thing. Email is all through Gmail or similar, and the idea of downloading a file or even just organizing it in Google Docs is not a thing they do. They've grown up with near instant search, and for most people that's going to suffice. I grew up on DOS and then later Linux and such in high school, and even I eschew much folder structure more than a level or two deep (though my naming conventions for files has improved significantly) outside of programming projects.

That said, both of my two youngest kids followed the same path that you can probably find through most of the software industry, and though it's not my day job, me as well. And that's wanting the computer to play a game or similar, and then having to learn this thing. Minecraft has probably done more for the next generation of software engineering than any coding class or high school program. Both my gaming boys are totally comfortable moving around the file system. The youngest (10) is absolutely obsessed with modding, so he started by changing some params in an XML or JSON file or whatevs to now very nearly writing his own code. He publishes mods every now and then, which are more generally patches on existing, and I'm guessing within the next year or so, he'll be writing from scratch.

Indeed I have. It isn't an exaggeration.

Mobile computing and cloud storage are to blame. For a large contigent of people these days, their cell phone is their primary computing device. Those make even viewing the filesystem difficult and cumbersome, and if you're not a power user you just won't see it at all. Then, on laptops and desktops, operating systems these days very strongly push their cloud storage solutions. Again, these typically make viewing the actual structure difficult, instead one has to rely on search or recommendations.

I have the same worry but, reading the above comment, I feel slightly better.

Well it's not so much their fault but the one of their parents and society around them. That's why you can find Gen Z'ers very capable of programming and handling a GNU/Linux distribution, while others couldn't even be bothered with simple operating system concepts exposed to them on their iPhones.