Interesting topic.
I work in a "business casual" environment; this field was not business casual when I was a kid. Nor was church.
At work, we are trending even less formal. The younger people with real job security already wear jeans (or something close to that) up to 50% of the time. For people with less job security, it's still probably about 20% (outside of casual Friday, which is really just "jeans" Friday). I wish we would go to jeans whenever. There's no reason we need to be more dressed than that on a regular basis. But shorts and t-shirts would be too far.
In general I like the change toward more casual, but respect for where you are still matters.
For me, church has become business casual, and I like it--but not for a funeral (or a wedding). My version of God doesn't care if I'm wearing a tie, but I think I should show some modicum of respect. For a funeral, I don't think anything less than a dark suit is appropriate. For a wedding, if it is at a church, a suit is required.
For people who truly don't have a choice, wear whatever they have, but if you have a choice, church (and government buildings) require something that shows respect.