The letter-spacing on "Pay" is okay because the original owner of the wood font had mortised it. I have not had the heart to put the type on the saw yet... But for the sake of typography it may come to that. In hind sight it would have been smart to quad out the line a bit more & increase letter spacing to avoid the issue all together.
Dude, what program do you have on your computer that cuts wood type? Hook me up!
I'd call it letterspacing. The only way to tighten it would be to carve out the excess wood on the bottom left side of the T. Some folks don't want to cut up their type. Bad kernning is part of the appeal to letterpress IMO.