You are correct. The culprit is El Capitan. Hyphenation does not work in Pages '09 (aka Pages 4.3). It does work in Pages 5. But Pages 5 is totally worthless to anyone producing more than one page documents. I use Pages to design and layout books. Used to work great, but not now. I proved this by opening a 425 page manuscript I created on Pages 4.3 under El Capitan, and that I was unable to hyphenate, on another computer operating under Mavericks. It hyphenated just fine. Everything exactly the same except for the OS. So what is the solution? Here is what I have tried:
1. Create the doc in Pages '09 with automatic text flow and then open it in Pages 5. The text will be hyphenated, but the text boxes will be unlinked and a new paragraph is inserted at the top of every page. No good.
2. Export the doc created in Pages '09 to create a Microsoft WORD .docx file. The text will now be hyphenated, but everything else (drop caps, text wrap, image borders, captions, etc.) will be totally screwed up. No good.
3. Manually hyphenate. Just kidding. On a 128,000 word manuscript that would take three days and if you make one edit afterwards, it gets totally screwed up.
4. Re-install Yosemite or Mavericks. Not easily done and not advisable. But if all else fails...
5. Start over with a program that does page layout properly with hyphenation and text flow. And if you don't want to shell out the dough for Adobe InDesign or Quark Xpress, I have had good luck with iStudio. And it runs fine under El Capitan. I was able to migrate a manuscript from Pages '09 to iStudio using cut and paste pretty rapidly.
If anyone has a better solution (other than marching on Cupertino to demand linking text flow in Pages), please post it here. Thanks.