In 1960's youth-culture society was perceived as forcing people to conform to a shape that fitted together. This meant that men always wore short hair, women never showed bare skin other than hands and face... In 'hippy' (hence 'hip') terminology this was called 'being square', with negative conotations of loss of individuality. Rebelling against this, men grew long hair while men and women in general began wearing colourful clothes and showing off their bodies.
A generation later, after 'punk' culture had taken non-conformity into its anarchic, nihilistic philosophy, the idea of 'being square' has come full circle and taken on positive conotations.
Thus this song lyric is addressed to people of the hippy generation, saying it is 'hip' ('cool'/good) to wear a suit and short hair.