Cause red and blue rags are the new blue collar
A blue collar worker is a member of the working class who does manual labor. The term derives from the workers wearing navy blue so dirt or grease stains would be concealed making the workers look cleaner.
Red and blue rags are a reference to the Bloods and the Crips. Members of these gangs tend to wear bandanas with the respective color of their gang (red for Bloods; blue for Crips) around their face, head, or in their pocket.
Murs is saying that people went from working hard to make money, to joining gangs and making money illegally (pimping, dealing, stealing).
To help improve the meaning of these lyrics, visit "Tale Of Two Cities" by Murs (Ft. 9th Wonder) and leave a comment on the lyrics box