Pharaoh allows for the creation of an educated class of citizens who live in better homes and hold down less manual jobs. Citizens are educated by having access to a Scribal School which dispatches teachers to teach people in nearby homes. In the more cultured cities, a library may be erected which, in turn, sends out librarians to provide further education to the elite citizens. Both Scribal Schools and Libraries require a constant supply of papyrus to operate.
Those who have received a large amount of education and who live in the top class of homes, are eligible to become a Scribe. Scribes are elite citizens who do not hold a job in the city, but rather spend their days in academic pursuit. It should be noted however, that having too many scribes will cause the city's employment levels to drop, eventually causing some scribes to become ordinary citizens and rejoin the work force. This, in turn, makes the former scribes, and the city in general, unhappy.
The precise mechanism of working/non-working classes is this: once a home becomes a common manor (the first 3-by-3-square home, see Housing), any and all workforce previously living in the fancy residence (the level-below home) from which the common manor has just evolved will at the point of the upgrade of their home leave the city workforce (for a fully occupied fancy residence that makes about 25-30 workers per home) without further ado - for all intents and purposes the city's workforce will drop by that number instantaneously. As on many occasions, an entire block of houses upgrades at the same time, this shift to the scribe class can mean an instant loss of about a hundred workers - quite a shock for the economy. However, if you can find elsewhere enough workers to fill the city's jobs, there is no problem with some of your people becoming scribes.
The benefit of having scribes is twofold, but still dubious in the face of the heap of potential problems the "over-scribization" of your city may cause. Pro one: scribes pay stupendous taxes. Con one: if you have a prosperous city without scribes, you don't need the extra income, and it's not such a wonder anyway. Pro two: provided you can stay in black numbers, having the high-level homes raises your prosperity rating. Con two: you can still have a city with a prosperity rating of up to about 75 without having to resort to scribes, so unless the target is 80 or more, you don't really need them to beat the mission.
Keep in mind that scribe homes require a lot of services, the provision of which requires a lot of workers. There is a limit to the number of scribe houses above which it is technically not possible not to have labor shortages. Players should try to not even come close to it if they want their economy to remain stable. As a rule of thumb, a reasonably well-managed city can safely afford about 2 scribe-class homes (common manor and above) per a thousand residents (provided the city isn't currently building a pyramid, which takes a lot of workers).
Finally, once a home reaches scribe level, players should try to make it evolve as far as it will go to maximize the tax income and prosperity rating benefit, as it is the only thing they get in exchange for the diminished workforce. Obviously one should not take extreme pains to make those manors go higher, but if the next class upgrade is relatively easily affordable, players are encouraged to go for it.
To be precise, the upgrade to a stately manor (2 levels up, i.e. 3rd scribe-class home level) should be "reasonable" enough - in most cities where scribes come into question, high culture targets require you to have at least a couple senet houses and libraries anyway, and access to three temples tends to be a standard (scribe-supporting cities are usually big, and gods get angry if there aren't enough temples to go around, which usually makes it best to have temples to all the available gods on every block (unless there aren't all five of them in the mission, that is)).