An agent based model of a labor market influenced by the public sector is developed.  Three kinds of agents interact within the market economy: public sector firms, private sector firms and individuals. Individuals work at firms and purchase products from them.  Public sector firms hire workers and sell products without regard for profitability, while private sector firms use learning to determine price, profit maximize, compete for sales, bid for labor, and have a hard budget constraint.   Individuals are taxed in proportion to the size of the public sector.  The model contains a parameter determining the ratio of private to public sector firms.  Entrepreneurship, economic growth, unemployment and wage levels are compared between simulations with different levels of public sector employment.

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