One of the most picturesque parts of Iceland is its northwest, usually called the Westfjords. Here the mountains come close to the coast, and distances between towns are magnified by roads that laboriously travel around the shores of the long fjords that characterize the region. One town I went through in 2013 was Flateyri on the shores of Önundarfjördur, scene of a disastrous avalanche in October 1995. The town had a small population to begin with; and, after twenty people died in the avalanche, many of the survivors pulled up stakes and moved to other parts of Iceland which were not as susceptible to avalanches.
There is still an active fish processing industry in Flateyri, so guest workers from Poland and the Philippines were invited to take up the slack. This caused some problems, as the town fractured on cultural fault lines, with the native Icelanders not mixing well with the Poles and Filipinos, and the latter not making much of an effort to mix with the natives. You can read about this in a 2006 article from the Reykjavík Grapevine. I imagine that, over the last eleven years, the situation as changed for the better. For one thing, there is now a tunnel connecting Önundarfjördur with Isafjördur, the largest town in the Westfjords, taking hours off the trip by highway. I took this tunnel, called the Bolungarvíkurgöng, and it is quite an achievement—17,717 feet in length,
To protect against future avalanches, the Icelanders built a retaining wall (visible in the above photo, shaped like an upside-down “v”). The local restaurant, Vagninn, has re-opened; and a cultural center has been built.
Small towns in Iceland have had a difficult time surviving, especially when there are no large local projects such as aluminum smelters to act as an employment draw. Meanwhile Reykjavík continues to grow at the expense of rural Iceland. One possibility is that global warming will benefit rural Iceland, with more cash crops being grown outside of greenhouses.