At first glance 40,000 striking Verizon workers and Silicon Valley's top tech startups do not seem to have much in common.

But it turns out that there are more Verizon workers on strike--who total less than a quarter of that company's work force--than all of the jobs that the most prominent startups have created since they've gone public in recent years, according to recent research. (And, yes, this calculation includes well-known giants like Facebook, LinkedIn, and Twitter.)

That's important to keep in mind, considering the new executive order signed by President Obama on Friday. The goal of that directive is to increase business competition by cutting down on monopolistic behavior from large companies, such as the actions Verizon's workers might say the company is guilty of. In Verizon's case, that behavior includes cutting wages and workers, and shutting down a number of its U.S.-based call centers to save on costs, strikers say.

President Obama's hope is to give a boost to the economy, as well as to smaller businesses and their employees by engaging the Department of Justice and the Federal Trade Commission more than they have been during his administration. He has asked those agencies to use their authority to promote competition by stopping mergers and acquisitions that consolidate too much power in one industry, and to halt outright anticompetitive labor practices, price fixing, and blocking access to resources--essentially using economies of scale to put smaller businesses at a disadvantage, among other things.

"Competitive markets also promote economic growth, which creates opportunity for American workers and encourages entrepreneurs to start innovative companies that create jobs," the order says.

It's a complicated position to take, and one that may not tell the entire story. There are, of course, perennial questions about how effective the U.S. government--indeed, any government--can be when it comes to fostering competition in the private sector.

In a brief accompanying the president's executive order, Jason Furman and Jeffery Zients, two economic advisers to the president, describe how the Federal Communications Commission used its power in the mid-1990s to open up the telecommunications industry to a broader range of companies after decades of anticompetitive practices. Similarly, the brief describes how most consumers might benefit from more competition in the cable industry--they continue to pay on average about $231 a year to lease their cable boxes, even though the price of that box has steadily come down over the years, because they lack alternatives.

"Across our economy, too many consumers are dealing with inferior or overpriced products, too many workers aren't getting the wage increases they deserve, too many entrepreneurs and small businesses are getting squeezed out unfairly by their bigger competitors, and overall we are not seeing the level of innovative growth we would like to see," Furman and Zients write.

While breaking up monopolies or overconcentration in an industry by some companies may indeed spur competition and ultimately create more jobs, the truth is that startups--in particular the fast-growth tech companies frequently lionized as saviors of the economy-- often aren't the big job creators the economy needs. That's according to Jerry Davis, a professor of management and sociology at the University of Michigan's Ross School of Business.

In fact, the problems the U.S. economy faces are much more structural and entrenched, Davis says. The biggest employers today are retailers, where wages are low and turnover is high. Walmart has about 1.4 million workers. Grocery chain Kroger has 400,000. Home Depot has about 371,000, according to Davis's research.

By contrast, Facebook has about 10,000 employees. Linkedin has 7,000. Twitter has fewer than 4,000. And Uber, which has about 2,000 full-time employees, has more than a quarter of a million drivers in the U.S., who work for the company on a contract basis, without benefits or much job security.

As Davis writes in his research, today startups can be "radically tiny in employment" and still dominate a particular industry. So simply by increasing competition, we won't necessarily get to a stronger economy, more jobs, or even less competitive practices.

In fact, the opposite may be true.

"If you go public, or are publicly listed, you will never be rewarded for creating jobs," Davis says. "Workers are a big expense."

An executive order that tries to level the playing field for all businesses is a good place to start. But giving startups a reason to invest more heavily in their employees would be a better strategy, and deliver a bigger payoff in the long run.

Published on: Apr 19, 2016